Author: The Business of Society

Should We Boycott the FIFA World Cup in Qatar?

By Andreas Rasche

On 20 November, the FIFA World Cup in Qatar is opening its doors. Billions of football fans around the world will tune in and watch this mega sport event. As we are getting closer to the opening match, I am often being asked whether I believe it is responsible to watch the World Cup or whether it is better to boycott the tournament. Here is my personal assessment.  

Human Rights Problems – More Than Labor Rights Violations

While the labor conditions of migrant workers in Qatar have attracted most media attention, the human rights problems go much further. Journalists are thrown into jail while covering stories around working conditions, the LGBTQ+ community is subject to ill-treatment, and women’s rights are still significantly curtailed.

Those arguing that the country made progress in terms of human and labor rights have a point. The kafala system – a system leading to the exploitation of migrant workers that can potentially give rise to forced labor – has undergone some reform in 2020, however, this is ten years after the country was awarded the World Cup and it only happened after significant pressure. It is also true (and noticeable) that Qatar is the first country in the Arab Gulf region to have made such changes.

But should we celebrate this as an achievement of the World Cup taking place in the country? Following this logic, we should award countries that limit human rights mega sport events in the future hoping that these countries may agree to reforms that are long overdue. Also, who tells us that Qatar will keep making progress in terms of human rights after the World Cup has ended and media attention has vanished?  

Just a few days ago, one of the official World Cup ambassadors, Khalid Salman, talked about gay people in an interview with German television. He mentioned that “We will accept that they come here. But they will have to accept our rules.” He then moved on claiming that gay people are “damaged in their mind.” At this stage, a spokesperson of the World Cup organizing committee (who was shadowing the reporter while being in Qatar) stopped the interview.  

Some supporters of the Qatar World Cup argue that we did not “make such a fuzz” when the tournament took place in Russia in 2018, just four years after the illegal annexing of Crimea. In 2018, Russia faced significant human rights challenges, some of them very similar to the ones of Qatar (e.g., lack of freedom of speech and ill-treatment of LGBTQ+ community). While it is difficult to directly compare both cases (e.g., labor conditions were not that debated back then), it would be misleading to justify one problematic mega sport event through lack of attention to another one.

A Corrupt Bid

One of the strongest controversies around the World Cup has been around whether the bidding process was influenced by corrupt behavior, a claim that Qatar has long denied. However, a longstanding investigation of the U.S. Department of Justice claimed that representatives working for Qatar and Russia bribed FIFA officials ahead of the 2010 bid.

In 2020, the New York Times reported that three South American officials received payments to vote in favor of Qatar and Russia according to the indictment. In the end, Qatar defeated the U.S. in the bidding process. At the time of the vote, the FIFA committee was already diminished by two members who were secretly filmed while agreeing to sell their votes.

Of course, Qatar is not the only country to have won a World Cup through a corrupt bidding process. Investigations revealed that Russia’s bid for the 2018 World Cup was also linked to bribes, and the German World Cup in 2006 was also allegedly linked to dubious payments. Yet, we cannot legitimize or downplay corruption in the case of Qatar by reference to prior corrupt practices during World Cup bids. Grand corruption was and is a deeply problematic practice, regardless of where and when it occurs. No-one is suggesting to bar countries that are known for higher levels of corruption from future World Cup bids. What is needed are stricter compliance rules and better oversight.

The Net-Zero Winter World Cup?

The decision to move the World Cup to November/December was made so that players do not have to play in the middle of the unbearable summer heat. FIFA estimates say that the World Cup will produce 3.6 million tonnes of carbon dioxide during the tournament, which is about the carbon footprint of a smaller country. By comparison, the World Cup in Russia produced 2.1 million tonnes. It is uncertain whether we can actually trust these figures. A report by Carbon Market Watch suggested that the emission figures associated with the construction of the new stadiums are vastly underestimated due to the methodology used by Qatar.

Where do the emissions come from? Contrary to popular belief, stadium air conditioning does not contribute the lion’s share of the overall emissions. Emissions mostly come from the need to build totally new infrastructure (incl. housing and ground transport) and to get fans to Qatar (which is for many fans only possible via plane). Given that the U.S. (the main competitor in the bid) already had most of this infrastructure, makes the decision to place the World Cup in Qatar seem even more strange from an environmental perspective.

Qatar has promised the “first carbon-neutral World Cup in history”. However, so far only 1.8 million tonnes of carbon have been offset, and experts have argued that the quality of the carbon credits is low, for instance due to problems associated with additionality.

The problem with net-zero mega sport events is not only the credibility of the claim. It gives the false impression that we can build huge stadiums and fly in people from all over the world, and that all of this is somehow compatible with reaching Paris-aligned climate goals.

To summarize, we have placed the World Cup into a tiny desert state that significantly and systematically harms basic human rights, that has moved the World Cup final near Christmas to avoid the extreme summer heat, and that has allegedly won the bidding process through corrupt behavior.

Importantly, only pointing the finger at Qatar may be too easy, some of the problems reflected through the World Cup are part of much bigger problems surrounding football as such, most of all its extreme dependency on money.  

I am a football fan, and I will miss the matches, but I am also a fan of human rights, environmental protection, and anti-corruption. Football is for everyone and not just for those a repressive regime deems worthy. So, I rather stay away from the matches and instead spend time playing football with my son. In the end, the World Cup in Qatar will not have a true winner, because sustainability already lost…  

About the Author

Andreas Rasche is Professor of Business in Society and Associate Dean for the Full-Time MBA Program at Copenhagen Business School. More at: www.arasche.com. 

Environmentally sound and financially rewarding? Key findings from an exploratory study on the Science Based Targets Initiative (SBTi)

By Milena Bar, Ottilia Henningsson, & Dr. Kristjan Jespersen

◦ 5 min read ◦

The Science-Based Targets initiative aligns firms’ emission reduction targets with a net-zero emissions pathway. Firm commitment yields significant abnormal returns which are larger for firms committed to larger emission reductions and for high-emitting firms. 

The IPCC’s sixth assessment established a code red for humanity and provided mounting evidence of widespread, rapid, and intensifying climate change. The Paris Agreement, ratified by over 190 states and non-state actors in 2015, formally stipulated the goals of limiting global warming to ideally 1.5°C and at a minimum well below 2°C with the aim of reducing the most catastrophic damages related to climate change onto the natural environment, human health and global financial market. The need for climate action is urgent and requires engagement from governments, individuals as well as corporate and investor participation.

Combatting climate change requires voluntary private sector engagement

Incentivizing corporations and investors to act voluntarily on climate change is critical to redirect private capital towards environmentally responsible business practices. The Science Based Targets initiative (SBTi) is becoming the global standard for firms seeking to set emission reduction targets aligned with the required global decarbonization targets established in the Paris Agreement. By encouraging voluntary corporate carbon emission reductions, the SBTi is a critical tool to reduce the private sector’s reliance on fossil fuels. 

2021 record year for new approved targets and committing firms for SBTi

Since its founding, just seven years ago, SBTi has experienced exponential growth in the number of committing firms and has mobilized firms representing more than a third of global market capitalization to reduce their carbon emissions. In 2021 the initiative took steps to increase the ambition level of firms’ emission reduction targets. When first established, firms could commit to reduce their emissions either aligned with the reduction targets of 1.5°C or 2°C. However, from summer 2022, the initiative will only be accepting the more ambitious emission reduction target, as set out in their campaign Business Ambition for 1.5°C.

Since company engagement ultimately comes down to whether committing to SBTi will drive wealth for shareholders, understanding the stock market response to firm commitment to the SBTi is essential not only for businesses looking to commit, but also for investors. To justify the integration of a climate credential such as the SBTi in investment management, it needs to be able to provide excess returns. To understand the stock market reaction to firms’ announcement of SBTi commitment, we conducted a short-horizon event study on a portfolio of 1.535 firms.

Firm commitment to the Science Based Targets initiative aligns environmentally sound practices with financial viability 

Firm commitment to the SBTi indeed yields a positive announcement abnormal return and thus speaks to the credibility of SBTi in constituting a credible signal of firm commitment to sustainable business practices. Even more encouraging is the finding that firms committed to the 1.5°C target experienced substantially higher returns, indicating a stronger positive market reaction when exhibiting a higher cost of commitment and higher target ambition level. The market evidently differentiates between ambition levels by rewarding businesses that are pledging themselves to more demanding emission reductions and a more climate-friendly business strategy. These findings are particularly relevant in light of the SBTi making the more stringent emission reduction target the new standard for all firms via their campaign Business Ambition for 1.5°C and may encourage more firms to increase their efforts in reducing their greenhouse gas emissions.

Stock price reaction in response to commitment to the Science Based Target initiative

In turn, high carbon emitting firms, proxied here by firms identified by the CA100+ list, reaped the largest reward in their stock price following commitment. This finding further confirms the market’s more sensitive reaction to costlier commitments, but also creates concern about whether the SBTi may have to rethink a recent strategic decision. The SBTi announced that they will not be accepting targets set by firms operating in the Oil and Gas industry, thus abandoning the industry specific methodology for fossil fuel firms which had been in development for several years. Fossil fuel firms have a key role to play in successfully achieving the goals of the Paris Agreement, thus begging the question of whether the SBTi is not missing out on covering an industry critical to combatting climate change and a sector of firms who are highly rewarded by the market for committing to reduce their emissions. 

As climate disasters become more prevalent and more severe, firms who fail to transition to a low, or zero, carbon business model can be expected to become more vulnerable in the long run. To expand the analysis, we further tested the performance of a portfolio strategy screened for firms committed to the SBTi. Despite the underperformance of an SBTi screened portfolio against a portfolio consisting of only non-committed firms in the medium-term, there is reason to believe that a portfolio with SBTi committed firms may provide higher returns in the future. Given that SBTi commitment represents a commitment to aligning the firm’s operations with the net-zero emissions pathway, it can be perceived as a safer bet in the long run. Moreover, portfolios consisting of SBTi firms were shown to be characterized by lower volatility. The objective of investors is shifting to increasingly sustainable and impact focused investment profiles, hence portfolio and asset managers may use SBTi commitment as a filter in security selection to achieve their client’s demand.

Looking Ahead

Financial institutions have a key role to play in driving systematic economic transformation towards a global net-zero carbon emissions economy in their power to lend and invest. As evidenced, firm commitment, ambition level and cost of commitment are reflected in the stock’s pricing mechanism, making the business case for the firm to set ambitious targets for decarbonization, and providing rationale for investors to in the short run utilize the market’s reaction to firm commitment in investment processes and strategies. 

About the Authors

Milena Bär is a recent graduate in MSc Applied Economics and Finance and is working as a student researcher in ESG and Sustainable Investments at Copenhagen Business School. Her research projects are mainly within the field of ESG metrics and regulation, with a focus on the investor’s side.

Ottilia Henningsson recently graduated with a MSc in Applied Economics and Finance from Copenhagen Business School with a keen interest in the transition towards a more sustainable financial industry. 

Kristjan Jespersen is an Associate Professor at the Copenhagen Business School. He studies on the growing development and management of Ecosystem Services in developing countries. Within the field, Kristjan focuses his attention on the institutional legitimacy of such initiatives and the overall compensation tools used to ensure compliance.

Photo by Matthias Heyde on Unsplash

Constructing Social Portfolios: A Quantitative versus Screening Approach

By Alina Hofer, Lea Katharina Kasper & Dr. Kristjan Jespersen 

◦ 5 min read ◦

When we talk about ESG, one could argue that there is a strong bias focused on climate investing, reaching net zero targets as well as good corporate governance and diversity themes. But there is much more to ESG. The “Social” dimension of ESG is hugely under explored and developed and covers under studied issues such as how companies treat their employees and care for the responsibility of their products. Still further, assessments linked to human rights codes and social impacts is only now receiving the attention it truly deserves. Although the importance of these topics is undisputed, we see that attention to particularly address the social dimension has been lacking, whereas awareness of other ESG risks has been rising immensely during the past years. 

Not only is the general knowledge and focus on the social dimension of ESG limited, its overall  implementation in portfolio management has not been sufficiently experimented with and addressed.

The delay to properly implement the “S” in ESG is often explained because of the challenges to quantify, assess, and integrate social factors generally.

However, this argument should not be a sufficient justification for neglecting the “S” in ESG and for investigating a possible relationship between a good social rating and superior financial performance. To tackle this lack of awareness, we constructed two portfolios which integrate Refinitiv’s Social ratings based on different integration strategies and test their performance towards the market between 2012-2021.

When integrating social – or other ESG – ratings into the investment process, we find there is often disagreement on how to best consider these factors in portfolio construction. Currently, it is most common to apply screening or best-in-class strategies. These approaches aim to remove assets that do not fulfill certain criteria from a defined investment universe. Negative screening would mean to remove those companies that perform worst from the pool of assets. Inversely, an investor could also only continue with those firms who at least have a certain minimum rating. For both approaches, the portfolio weights are then allocated to the assets that remain. This is done using conventional indicators such as value, size or expected risk-adjusted returns. In our study, we, however observe a clear shortcoming of this approach: After screening out the worst 10% “social performers” and allocating weights based on a risk-return trade-off, the portfolio does not necessarily promise a higher overall ESG score than a portfolio would reach which does not consider the ratings at all. Although the portfolio yields a solid financial performance, this raises the question whether any ESG-related impact has been made with this integration approach.

To make sure an investor can improve his exposure to assets that score well in the social dimension, we integrate the rating scores directly into the optimization problem of our second portfolio. This leads to a very different outcome on the social rating:

Looking closer at the mechanics of this approach, we extend the traditional Sharpe Ratio with the ESG factor, meaning to add by how much it a company “outscores” the market average. This results in the following “Social Sharpe Ratio”:

We add a fifty percent weight split, which can be flexibly adjusted towards investor preferences. And we now balance a risk-return-social trade-off. This explains why the second approach over 9 years constantly beats the market average in respect to the integrated Social factor without sacrificing any performance on the financial side. In fact, we find that in 5 out of 9 years, the second strategy would have also led to higher risk-adjusted returns measured by the Sharpe ratio. Moreover, returns were consistently higher compared to the market benchmark. This result is quite remarkable, given that it is often questioned whether investors need to sacrifice returns in order to make their investments more socially responsible. 

Lastly, our study resulted in one more unforeseen twist when it comes to integrating ESG ratings. That is, the question whether we can actually trust the rating scores. To answer this, we must first understand how scores are created. Rating providers look at an immense amount of publicly disclosed information, reports and policies. And based on what company’s report, rating scores are aggregated. However, it is clear that a firm would only report on things they do well. In fact, we observe that with increased reporting, ESG scores also improve. But what about the real-life actions and impacts? Some rating providers offer a combined score, which also considers media reports on the involvement in controversial actions. As these scores are only available at an aggregate level, we calculate them on a single-pillar level using Refinitiv’s methodology, which adjusts for firm size and industry. Looking at specific examples in our portfolios, we found that the impact of such controversy involvement on the overall score could still be larger. Nevertheless, we stress that in order to have a complete picture of a firm’s ESG behavior, the impact of these controversies needs to be reflected in investment decisions. 

To sum up, given the results of our research, there are three things we aim to highlight:

  • It is crucial to increase investors’ awareness of “Social” matters and provide a better landscape for impact investments in this specific dimension.
  • Integrating ESG ratings does not always promise a better ESG performance for the whole portfolio. Therefore, it is necessary to focus on strategies that lead to actual impact.
  • Third, looking beyond the information that is disclosed by companies themselves, more attention should also be addressed to “real life actions” when making investment decisions. 

About the Authors

Lea Kasper has recently graduated with a MSc. in Finance and Investments (cand.merc.) from Copenhagen Business School. Her interest and enthusiasms about sustainability and how to more efficiently integrate non-financial factors in investment decision-making contributed to her choice to further investigate this topic throughout the master thesis. 

Alina Hofer has recently graduated with a MSc. in Finance and Investments (cand.merc.) from Copenhagen Business School. Being passionate about creating impact through ESG-aligned investments, she was excited to further focus on her interest in this field throughout the master thesis.

Kristjan Jespersen is an Associate Professor at the Copenhagen Business School. He studies on the growing development and management of Ecosystem Services in developing countries. Within the field, Kristjan focuses his attention on the institutional legitimacy of such initiatives and the overall compensation tools used to ensure compliance.

Image source: SustainIt

Corporate social responsibility and societal governance

By Jeremy Moon

◦ 3 min read ◦

Russia’s invasion of the Ukraine reminds us that corporate social responsibility (CSR) is both a reflection of the times we live in and also dynamic! Numerous corporations, acting in response to social and political pressure, are withdrawing from Russia on the grounds that human rights, and a nation’s rights, are being trampled on. This is not to say that these decisions necessarily come easily: there may be ethical, strategic, stakeholder and political tensions. But the point is that perhaps the most basic societal issue of war and peace – and its governance – enters CSR agendas. Ethical investors are even considering the defense industries as suitable for their assets.

In recent decades several challenges have emerged which appear to move CSR from a relative comfort zone of discretionary activities to more core societal governance challenges, some of these manifestly involve some corporate culpability (e.g. the 2008 financial crisis, international supply chain labor abuses, climate change, ecological degradation), others like international pandemics, war and international health and welfare challenges reflected in the UN Sustainable Development Goals, may reflect wider causes. Nonetheless, corporations claim some responsibility for these issues. Even corporate ‘talk’, as well as ‘walk’, contribute to the redefinition of CSR to take in core societal governance challenges.

This is understood as right and proper from some perspectives. Medieval corporations were established precisely to achieve public ends – often of basic infrastructure. Industrial corporations were pioneers of C19th health, welfare and education systems.  In many developing countries corporations take responsibility for physical security of their employees and communities. 

But in the late C20th a view took hold that this was somehow inappropriate.  Milton Friedman’s famous 1970 critique of CSR was precisely on the grounds that corporations are not accountable for addressing such issues: governments are. Many CSR advocates, whether fearing a corporate takeover of government or vice versa, and have advocated a dichotomy between the responsibilities (social and economic) of corporations and those of governments.

Yet the last twenty years have witnessed two related phenomena which challenge the dichotomous view. First, corporations have chosen to engage in social and environmental agendas which are core for national and international governments (e.g. human rights, corruption, access to resources), whether in response to pressure or by virtue of their own ethical or strategic judgement. Secondly, governments have encouraged corporations to enjoin public efforts, through their policies of endorsement and cajoling, financial incentives, partnerships and even mandates (e.g. for energy markets, non-financial reporting, supply chain due diligence).  

Governments have recognized the distinctive resources that corporations can bring to governance questions (e.g. to innovate, to experiment, to reach beyond national boundaries, to collaborate). Interestingly in cases of mandate, governments often cede to corporations discretion as to how, rather than whether, to comply. Thus, for example, corporations can choose whether to cynically comply with international weapons sanctions on a country to sell arms by the legal use of third parties to effectively maintain the sales OR to embrace the spirit and intention of the sanctions and uniformly cease the sales to the regime in question.

But Friedman’s critique nags and critics of corporations point to unaccountable corporate power through lobbying and informal influence.  Corporations lack a traditional democratic mandate. We elect MPs and governments, but not CEOs. So is engagement with public policy (rather than legal compliance) really the business of corporations?  

My short answer is ‘yes’ on the grounds that businesses are members of society and that corporations are afforded particular privileges by the state, and thus have clear public duties. But the situation is not satisfactory.  In most democratic jurisdictions corporations’ roles ‘to make’ and ‘to take’ regulation are not clearly specified and thus their accountability is unclear.  Moreover, new international multi-stakeholder initiatives which tie corporations in with each other and with civil society often fail to effectively regulate errant organizations.  

So we have a challenge which is about CSR and politics: how to better build corporations into political institutions? I suggest that the challenge is shared – for corporations to review their political participation to ensure that it is citizenly; for civil society to engage in defining how corporations can be more accountable and to engage more directly in corporate accountability (perhaps with support from government?); and for governments to review how accountably corporations influence and respond to regulation.  

About the Author

Jeremy Moon is Professor at Copenhagen Business School, and Chair of Sustainability Governance Group. Jeremy has written widely about the rise, context, dynamics and impact of CSR.  He is particularly interested in corporations’ political roles and in the regulation of CSR and corporate sustainability.

Photo credit: TarikVision on iStock

Do nudges work in organisations?

By Leonie Decrinis

◦ 3 min read ◦

Introduced by Thaler and Sunstein in 2008, nudges have become popular policy tools to change the behaviour of consumers and citizens in desirable ways without compromising their freedom of choice. Their success in public policy domains has sparked the interest of management teams to apply nudges in organisations as means to guide the decisions of employees. However, in comparison to the ever-growing literature on the use of nudges in the public sphere, relatively little is known about their applicability at the workplace. 

More and more organisations are pursuing corporate social responsibility and sustainability strategies, for which changes in workplace behaviour are key. Nudges can help organisations promote the needed behavioural change in relevant domains, such as employee health, energy conservation, green transportation, waste management, ethics and diversity, to name just a few. A number of studies report, for example, success in promoting healthier food choices of employees through alterations in the choice architecture of workplace canteens. Other nudging interventions have led to reductions in electricity use by providing feedback to employees on the desirable behaviour of peers. Regarding workplace diversity, evaluating job candidates jointly rather than separately has proved to promote gender-mixed teams. Further, in the ethical domain, honest employee behaviour appeared to rise by reminding people about their shared moral values at critical decision points. 

The mentioned examples provide an idea of the potential of nudges as cost- and time-efficient alternatives to traditional organisational intervention tools that mostly involve trainings and sanctions with limited success. A key advantage of nudges is their behaviourally informed approach, acknowledging the role of unconscious decision processes that often contradict people’s good intentions.

By altering the choice environment rather than trying to rewire the human brain, nudges can steer employees to desirable behaviours while preserving their freedom of choice.

Just recently, the United Nations Behavioural Science Week has convened experts from international agencies, governments, academia and the private sector to discuss about these possibilities. However, what has also been recognised, as much as workplace nudging involves opportunities, it comes with challenges that need to be addressed. 

The first question that one might ask is how nudging individuals inside organisations for specific concerns leads to impactful organisational change in line with strategic corporate goals. Theory tells us that this is possible indeed by nudging a significant amount of employees. Organisations are made up of people. When enough people are nudged to alter their behaviour in a specific way, the new behaviour has the potential to become a norm, i.e. a rule for expected and accepted behaviour. Once embedded in the culture of an organisation, people are likely to conform to the new norm, so that organisational behaviour changes as a whole. 

This idea comes with a caveat though. Organisations are complex social constructs with formal and informal components of organisational culture conveying a variety of messages to employees. A gentle nudge might thereby not be strong enough to induce the desired behavioural change. Signals elsewhere in the organisation could simply counterbalance the effect of a choice-preserving nudge. Typically, nudges are designed and tested for very specific instances of human behaviour. What works in one context might not work in another one, sometimes even resulting in unintended consequences. Clarifying the effectiveness of nudges is difficult in complex organisational settings, particularly regarding their impact in the longer term. This requires consequent piloting and testing over considerable periods of time, allowing for a flexible and adaptive approach to a particular setting.

Contrary to the idea of nudges being top-down policy tools, successful intervention implementation in complex organisational choice environments requires the active contribution of employees. The latter should be consulted about their needs, involved in the design of nudges and informed about the intervention implementation. A high degree of transparency is also necessary to ensure the acceptance of nudges by employees.

Another aspect to keep in mind is that widespread organisational change, such as switching from a solely profit-oriented corporate performance to a more encompassing economic, social and environmental one, cannot be addressed by nudges alone.

Complex organisational problems need to be broken down into micro pieces, suited to be managed by a variety of measures and instruments. Not all of the resulting aspects will have human behaviour at their core. Some might be fundamentally technological in nature, requiring innovative technical solutions. For those problems that remain to be behavioural, the ones that involve serious risks will always call for stringent enforcement tools. Others, however, might be better addressed through a voluntary, trust-based approach. This is where choice-preserving nudges come into play. Clearly, a single nudging intervention can only address a very specific concern. The wider organisational success depends on the aggregate of multiple nudges as well as their interplay with other policies. Measures ultimately need to send consistent messages about desirable behaviours, aligned with an organisation’s broader strategic goals. By influencing organisational culture in an encompassing way, widespread organisational change will gradually take place. 

Further readings

Beshears, J., & Gino, F. (2015). Leaders as decision architects: Structure your organization’s work to encourage wise choices. Harvard Business Review.

Foster, L. (2017). Applying behavioural insights to organisations: Theoretical underpinnings (EC OECD seminar series on designing better economic development policies for regions and cities). Paris: OECD and European Commission. 

Ilieva, V., & Drakulevski, L. (2018). Applying behavioral economics insights at the workplace. Journal of Human Resource Management. 

Venema, T., & van Gestel, L. (2021). Nudging in the Workplace. In R. Appel-Meulenbroek, & V. Danivska (Eds). A Handbook of Theories on Designing Alignment between People and the Office Environment.

About the Author

Leonie Decrinis is PhD fellow at Copenhagen Business School with research interests in corporate social responsibility, sustainability governance and behavioral sciences. Her PhD project focuses on applying behavioral insights to corporate sustainability in order to align governance objectives with organizational behavior.

Photo credit: Rudzhan Nagiev on iStock

ESG investing in a changing regulatory environment: investing in active or passive ESG financial products?

By Marco Morazzoni and Dr. Kristjan Jespersen

◦ 8 min read ◦

The impending climate crisis emphasizes the need to mobilize large-scale investments to finance the transition towards a more sustainable and inclusive economy. The financial sector plays a pivotal role in this context, as it allocates capital from investors who wish to pursue financial and non-financial objectives to corporations and stakeholders who need these resources to empower the sustainability transition.

Over the past decades, individual investors have become aware of the risks inherent in unsustainable business practices, being increasingly interested in financial products that combine a competitive risk-adjusted return with Environmental, Social and Governance (ESG) criteria. Despite the increase in funds, indices and benchmarks that include ESG dimensions, the universe of ESG financial products remains difficult to navigate for individual investors due to the range of investment strategies that can be used to pursue ESG goals, such as negative and positive screening, best-in-class, ESG integration, impact investing and ESG engagement. In addition to ESG strategic considerations, investors ought to consider the level of active management inherent in their ESG products, since it has considerable implications for financial returns and the ESG objectives pursued.

In fact, while some financial products have an active investment approach, trying to beat a reference benchmark, others merely aim to replicate the ESG impact and financial performance of an index.

‘Active versus passive’ debate

The literature on conventional active and passive investing is almost unanimously in favour of long-term passive investing, due to active managers’ inability to consistently beat the market and to the lower fees charged by passive funds. However, the ‘active versus passive’ debate in the context of ESG investing is more nuanced.  This is because ESG investing entails the pursuit of intangible and hardly quantifiable goals that go beyond the achievement of mere financial returns. Furthermore, due to the different definitions and methodologies used in the assessment of ESG performance and the resulting unrealiablity of ESG data, the trade-off between impact and financial returns can be difficult to reconcile. 

A study conducted on 78 ESG active mutual funds and 15 ESG exchange-traded funds (ETFs) seeks to contribute to the debate by illuminating the financial and non-financial features that characterize these sustainable financial products. The funds were selected from Morningstar Direct according to specific criteria, such as: availability of an ESG rating, European domicile, invested in equity, active investment approach (for mutual funds) and passive investment approach (for ETFs).

By constructing an equally-weighted portfolio for the selected ESG active mutual funds and ESG ETFs, the study used the CAPM, three-factor, four-factor and five-factor model to compare the portfolios’ risk-adjusted perfromance before and after fees. To increase the robustness of the study, the regression analysis was conducted on various market benchmarks, such as MSCI World, STOXX Europe 600, MSCI World ESG Leaders and MSCI Europe ESG Leaders.  

The regression results indicated that the ESG active portfolio outperformed the ESG passive portfolio both before and after accounting for management fees. Controlling for the criteria used in the selection of the funds, the active outperformance could be attributed to the funds’ instrinsic characteristics, such as investment orientation, ESG investment approach and ESG scores. Accordingly, 77% of the ESG active portoflio had a global investment orientation compared to 27% of the ESG ETF portfolio. This entails that the active portolio covered more geographies, exhibiting higher diversification and improved risk-mitigation.

Further, 83% of the active portfolio practiced ESG engagment, a strategy that previous literature associates to superior financial returns and improved ESG impact.

By engaging with companies on ESG issues, ESG active funds may have been able to help ‘lagging’ firms improve their ESG performance, while enabling ‘leading’ firms to address their ESG issues. With respect to ESG scores (Morningstar and MSCI), the active portfolio displayed a lower overall ESG score compared to the ESG ETF portfolio. This finding could suggest that the active portfolio invested in lower rated companies on average, with the objective of helping them transform their ESG strategy and thus pursue higher risk-adjusted returns.

Insights to individual investors in ESG financial products

Recognizing the limitation derived from the small sample size and the fact that the active outperformance might be due to the specific funds selected, the findings were used to provide a set of insights to individual investors who wish to invest in ESG financial products.

Firstly, individual investors were categorised into ESG-unaware, ESG-aware and ESG-motivated, according to the investor labels used by Pedersen et al. (2021) “Responsible investing: The ESG-efficient frontier”. This categorization simplified reality to the extent that it became easier to derive actionable insights. Furthermore, it provided more granularity with respect to investors’ prerogatives regarding the trade-off between the pursuit of an ESG impact versus a risk-adjusted return.

Based on this categorization, investors who disregard ESG information (ESG-unaware) should invest passively in broad conventional ETFs or in a diversified portfolio of more specific conventional ETFs.

Investors who consider ESG information for risk-mitigation purposes (ESG-aware) ought to focus on the level of selectivity displayed by active managers in their stock-picking activity, measured in terms of high/low R-squared. If active managers are highly selective (low R-squared), ESG-aware investors may consider foregoing part of their return, due to the higher active management fees, and thus benefit from managers’ ability to pursue a greater ESG impact and potentially higher risk-adjusted returns.

Conversely, if active managers exhibit low selectivity with respect to a reference benchmark (high R-squared), investors would be better off investing passively in broad ESG ETFs or in a diversified portfolio of more specific ESG ETFs. Lastly, ESG-motivated investors may be better off investing in ESG active funds who practice ESG engagement, as the higher fees charged by these funds would worthwhile, given the superior ESG impact inherent in ESG engagment strategies.

Regulatory considerations

In addition to the empirical findings, the study also included regulatory considerations in the assessment of the suitability of active versus passive ESG financial products for individual investors. This was critical, since the new MiFID for sustainability preferences will come into force on the 2nd of August 2022.

According to this regulation (2021/1253), investment firms will be obliged to ask their clients about their sustainability preferences and find out whether they are interested in sustainable financial products. If the answer is affirmative, financial advisors will only be allowed to offer MiFID-aligned products to their clients. A MiFID-aligned product will have to include a minimum portion of ‘environmentally sustainable Investments’ (SFDR article 9), EU Taxonomy-aligned investments, or enhanced article 8 investments, consisting of article 8 investments (SFDR article 8) which also include Principal Adverse Impact (PAI) indicators.

Linking the new regulatory requirements to the findings of this empirical research, it is reasonable to expect that ESG-unaware investors will no longer exist, as investment firms will be legally required to inform these clients about the ESG implications inherent in their investments. This will give rise to an increase in supply of sustainable financial products (MiFID-aligned), as investment firms strive to keep up with the increased demand for these products. The rise in supply will most likely be larger than the increase in demand, since a portion of the new ESG-aware investors might continue disregarding ESG information, if ESG financial products are priced unreasonably (excessively high management fees). This will ultimately lead to higher competition among investment firms, with a consequent downward pressure on fees in the long-run. Lower investment costs could subvert individual investors’ incentives, as they decide on whether to invest in ESG active or passive funds. Accordingly, it might become desirable for ESG-aware investors to invest in ESG active funds who practice ESG engagement, as opposed to it being a strategy exclusively suitable for ESG-motivated investors.

The information contained in this blog post is not to be taken as constituting the giving of investment advice or recommendation. The reader is acting for its own account, and they will make their own independent decisions as to whether any investment is appropriate based upon their own judgment.

About the Author

Marco Morazzoni is a recent graduate in MSc Applied Economics and Finance from Copenhagen Business School. Having an interest in finance and ESG, he wrote his master’s thesis on “ESG exchange-traded funds versus ESG active funds: how can individual investors pursue ESG objectives while achieving competitive risk-adjusted returns?”

Kristjan Jespersen is an Associate Professor at the Copenhagen Business School. He studies on the growing development and management of Ecosystem Services in developing countries. Within the field, Kristjan focuses his attention on the institutional legitimacy of such initiatives and the overall compensation tools used to ensure compliance.

Photo: Khanchit Khirisutchalual on iStock

Corporate Social Responsibility (CSR) in Asia: Then and now

By Wendy Chapple & Jeremy Moon

◦ 3 min read ◦

This blog post is a repost and has first been published by Business and Society (BAS) blog on 27th of April 2022.

It is both a bit weird and a great honour to be invited to reflect on our paper, “Corporate Social Responsibility (CSR) in Asia: A Seven Country Study of CSR Web Site Reporting”. The process has given us a chance to reflect on what we knew then, what we know now, and how much things have evolved. Our reflections cover memories of the context and origins of the paper; the data available – and unavailable – to us at the time; the approach we took – and what we see as its virtues – and the results; and the relevance of the paper to CSR in Asia today – nearly twenty years on.

As is often the case, the origins of a well-known paper are curious. Our paper grew from the internationalization strategy of the University of Nottingham (UoN) where we then worked in the International Centre for Corporate Social Responsibility (ICCSR). UoN had opened a campus in Malaysia and was opening another in China. So, the Vice-Chancellor encouraged us to engage with our colleagues there …which made us think that we should probably know a bit about Corporate Social Responsibility (CSR) in Asia … hence the paper. Little did we know what this would lead to!

Thanks to the ICCSR, we had the funds to employ researchers with whom we analyzed web site reporting of 50 companies’ CSR in seven Asian countries: India, Indonesia, Malaysia, the Philippines, South Korea, Singapore, and Thailand (bringing a range of business systems in terms of size, religion and culture, political system, and economic development). Hang on, you say, what about China? Our answer is simply that at that time there were barely any Chinese MNCs with English language website reporting… which is certainly not the case now! Although our choice of sample skewed the population to the larger companies with a strong international business profile, this did not concern us as it strengthened the testing of the CSR-shaping role of national business systems.

We focused on broad CSR waves, i.e. community involvement, socially responsible production processes, and socially responsible employee relations. Whilst it enabled broad generalizability of the character of CSR nearly twenty years ago, it does raise some questions of compatibility with current CSR agendas in Asia. However, the more inductive identification of component CSR issues (e.g. community development; education & training; health and disability; environment) makes the findings amenable to temporal comparison, providing a more fine-grained analysis of activity within the waves. We also focused inductively on the dominant CSR modes (i.e. how the issues were addressed). This is when things got interesting. We started to see distinctive country patterns emerge in terms of issues within the waves (e.g. community issues were particularly prominent in India, Thailand, Malaysia and the Philippines, but less so in the other three countries), but this was not the case in the modes. The modes deployed within each of the waves were strikingly similar: philanthropy dominated community investment, and codes  and standards dominated production processes. In other words, the “what” rather than the “how” was nationally distinctive.

Some conclusions now seem uncontentious, most obviously that ‘community involvement’ is the CSR priority in Asia. Similarly, there is no “Asian CSR” model, but a set of nationally distinctive patterns of CSR behaviour, resulting from the national business systems, rather than development. Reflective of the impact of globalization on CSR, we found that companies operating internationally were more likely to adopt CSR than those operating only in their home country. One might expect that international exposure might lead to an increase in similarity of approaches across countries; however, we instead found that the CSR of the multinational companies operating in Asian countries tended to reflect their host rather than their home countries, reinforcing the national distinctiveness. However, this finding may be a little simplistic in the light of emerging tensions between international CSR approaches and host country experiences.

It is great to see that CSR in Asia has attracted a volume of research and we are delighted that our paper has been a reference point for some of this research.

Blog Editor’s note: The authors’ paper, “Corporate Social Responsibility (CSR) in Asia: A Seven Country Study of CSR Web Site Reporting” , is open access until December 31st 2022 as part of the journal’s 60th anniversary celebrations

About the Authors

Jeremy Moon is Professor at Copenhagen Business School, and Chair of Sustainability Governance Group. Jeremy has written widely about the rise, context, dynamics and impact of CSR.  He is particularly interested in corporations’ political roles and in the regulation of CSR and corporate sustainability. He is the Project Lead of the RISC research project.

Wendy Chapple is a full Professor of International Business and CSR at the Vienna University of Economics and Business (WU Vienna). She has played central roles in programme design and development, designing CSR related programmes and has been programme director for MSc and MBA programmes in CSR in the UK.  Wendy gained recognition for the development of faculty, programmes and research, by winning the Aspen Institute faculty pioneer award in 2008.  At WU, she will contribute CSR and Sustainability modules to the CEMs and undergraduate programmes.

Photo: Wikimedia Commons

Institutions matter: The importance of institutional quality when embedding sustainability within the capitalistic realm

By Lisa Bernt Elboth, Adrian Rudolf Doppler, & Dr. Kristjan Jespersen

◦ 5 min read ◦

Institutions not only structure any sort of social interaction [1], but are also essential in solving societal problems [2], such as climate change and the associated threat towards a fair and just future. It is not without reason that the United Nations particularly emphasized institutional progress within SDG 16 [3] to advance to a more effective, inclusive, and accountable society. In a recent study, it was found that institutions matter to a great extent when scrutinizing the relationship between corporate financial performance (CFP) and ESG performance. More specifically, the institutional environment a company finds itself in determines whether sustainable business practices get transformed into financial returns.

The claim that more sustainable companies are outperforming their not so sustainable peers is not new [4] and the consequent shift of investors’ preferences towards more sustainable companies has been taking place with increasing speed over the last decade [5]. Associated wake-up calls and the urge to take ESG into consideration are not surprising either. Besides the alleged desire of investors for a just and sustainable future, this shift is more likely based on the theory that sustainable finance delivers abnormal returns [6]. But is the relationship between sustainable behavior and financial performance as straightforward as it is disseminated? Are more sustainable corporations indeed more likely to achieve better financial results regardless of where they are and what they do?

In fact, when utilizing ESG scores, rankings, and performance as a proxy for sustainable behavior, two meta-analyses [7] [8] concluded that in most empirical studies the resulting relationship was not as simplistic, universal or linear as it is often propagated. In a corresponding literature review, the researchers also identified a large number of discrepancies among scholars in how to statistically model the relationship, what control variables to use and how to even quantify the dependent and independent variables of focus. Following these insights, the researchers uncovered a determining factor in establishing and shaping the emphasized relationship – institutional quality.

Key Findings

The final sample consisted of datapoints from 6,976 corporations, situated in 75 different countries over a period of eleven years or, specifically, from 2009 to 2020. Subsequently, these were analyzed applying fixed effects panel regression models. Both an accounting- and a market-based measure were used to quantify corporate financial performance, respectively, Return on Assets (ROA) and Tobin’s Q. Meanwhile, ESG performance was proxied by ESG scores from Refinitiv (former Thomson Reuters). The variables associated with institutional environment were split into 

  1. Institutional Quality, calculated through a factor analysis and based on the World Governance Indicators from the World Bank and 
  2. Industry Sensitivity, a dummy variable equal to 1 if the GICS industry of a firm was deemed sensitive towards ESG.
Institutions are among the determinantal factors for the link 

Interestingly, the general statistical analysis of ESG and CFP did not yield any significant results, however, when moderating effects stemming from the institutional environment were introduced, this changed. Under high institutional quality, the researchers found a positive relationship between ESG scores and financial performance. Contrarily, the relationship was negative under low institutional quality. Exemplified below by the case of Finland 2012, Argentina 2018 and Zimbabwe 2012, institutions can be seen as the determining factor for direction of the focal link. Furthermore, the industrial environment a corporation finds itself in was found to affect the relationship ambiguously. Generally, sensitive firms seem to receive relatively less financial gain for improved ESG performance, and it may even be negative.

Possible explanations for such dynamics
  • Legal institutions, such as environmental regulations, labor laws or health and safety requirements, can serve as the means of reflecting sustainable behavior inside a company’s balance sheet. Finland was for instance the first country to introduce a carbon tax capturing corporate pollution by giving it a price and hence affecting accounting profits.
  • In highly corruptive settings, where the trust of the general public is lacking, the likelihood of sustainable activities being perceived as greenwashing and thus not rewarded by investors, could be another reason for an inverse relationship in low institutionally developed regions. 
  • In line with the previous, when accountability is low, and corporate entities can disclose information without third party verification, it could be relatively easy to stay focused on short-term profits through unsustainable practices but still receive a better ESG rating.  
  • In environments with low institutional quality, banks tend to only give out short-term loans in order to reduce their own risks. This can lead to a vicious cycle of corporate lenders also only focusing on short-term profit maximization which then again decreases their access to capital, constraining their ability to engage in long-term sustainable practices.
Putting the SO WHAT into practice

When setting out for systemic change, it is important to ensure the necessary institutional environment in order to encourage individuals, as well as corporate entities to act in the best interest of the entire society and the planet. Thereby, a bottom-up approach focusing on incentivizing every individual and a top-down approach, fostering legal macro-level change can be synthesized, leading to the best possible outcome. These institutions should seek to maximize accountability, transparency, and mechanisms to internalize negative externalities. Corporations within such environments should fully leverage opportunities associated with sustainable practices, such as cheaper access to capital, in order to incrementally advance the progress towards a just space for humankind. Corporations, which are especially sensitive towards ESG related elements irrespective of their ESG scores, should aspire to enhance their own credibility, as this might award them with a competitive advantage. Lastly, societies with high institutional quality should strive for teaching about their institutions and the associated benefits to everyone else, as a global problem can only be solved on a global level. 

References

Doppler, A.R., & Elboth, L.B. (2022). Institutional Quality, Industry Sensitivity and ESG: An Empirical Study of the Moderating Effects onto the Relationship between ESG Performance and Corporate Financial Performance (Unpublished master’s thesis). 22098. Copenhagen Business School, Denmark.

About the Authors

Lisa Bernt Elboth recently graduated with an M.Sc. in Applied Economics and Finance as well as a CEMS Master’s in International Management from Copenhagen Business School and Bocconi University. Her interest in global matters and sustainability has flourished during her studies impacting the choice of master thesis topic and this subsequent blog contribution.

Adrian Rudolf Doppler works as a research assistant for the Department of International Economics, Government and Business at Copenhagen Business School and had just graduated with a Master’s in Applied Economics & Finance and the CEMS Master’s in International Management after a two-year journey. He had always been passionate about ESG, Sustainability and the existing links with the capital markets, as well as the complex system dynamics arising form it.

Kristjan Jespersen is an Associate Professor at the Copenhagen Business School. He studies on the growing development and management of Ecosystem Services in developing countries. Within the field, Kristjan focuses his attention on the institutional legitimacy of such initiatives and the overall compensation tools used to ensure compliance.

Photo credit: Galeanu Mihai on iStock

Corporate sanctions in the context of the Russian invasion of Ukraine

Summary of the discussion with Sophia Opatska at CBS

◦ 8 min read ◦

This blog post is a repost and has first been published by UCU Business School on 5th of April 2022.

In normal life, I am a vice-rector for the strategic development of the best Ukrainian private nonprofit University and founding dean of UCU Business School. Right now, I am one of 4 million Ukrainians who left Ukraine because of bomb shelling and war, which Russia started on February 24th.

Sophia Opatska, 2022

What happens in Ukraine right now is devastating. Every day more and more people die, more and more cities are ruined. Over the weekend, the Kyiv region was liberated after a month of occupation. Pictures of Bucha (a beautiful small town near Kyiv) can make any normal person sick: mass executions, civilians being killed on the streets, lying there for days and weeks, half-burned bodies of raped and naked women, robbed houses.  Those pictures are telling the terrible truth about Russia, russians, and their war in Ukraine. There is no excuse for terrorism and what we live through and observed by the whole civilized World – is terrorism and genocide. 

Since this meeting and discussion is about business and economics, there should be numbers. So I will try to get into them, but no numbers can validate what Ukrainians saw in their cities after russian invaders left them. 

According to various estimates, our economy is ruined by between 500 billion and trillions of dollars. In 5 weeks. And it will take years and years to rebuild Ukraine. 

I think this is the first time in history when war is so connected to economics.

Unfortunately, Russia’s domestic political stability at the moment looks high. Protest sentiments in Russia are low, there has been no significant split between elites, and the loyalty of the security forces to Putin is not yet in question. 

There is little dissatisfaction with the consequences of the war among a small number of elites, mostly «technocrats» and «old officials». Young people under the age of 30 and the urban middle class are the most affected by the current situation and sanctions out of the population capable of protest. 

There are two types of sanctions – official sanctions of countries and private companies.

The G7 and the EU have decided to disconnect several Russian banks from the SWIFT system. The disconnection of banks from SWIFT does not limit their ability to make payments in foreign currency, but slows down payments and makes them more expensive.

It is important to note that the problems of banking transactions are rather temporary. At the moment, this leads to supply disruptions and rising costs, but over time, both importers and banks are adapting. Alternative and fast methods of payment through third countries or analogs of the SWIFT system will be created (for example, Russian SPFP and Chinese CIPS).

And if we are talking about the economics, let me give you 10 consequences of sanctions in the near future (1-6 months, key – 2nd quarter of 2022) for Russia in order to understand if and how they help Ukraine, mostly leading to changes within russia itself. As a basis, I took a report from the Ukrainian Institute of the Future that analyses the impact of the sanctions.

1. Devaluation. During the month of the war, the Russian ruble fell by 19% against the US dollar. In March, the European Union and the United States imposed a ban on the import of banknotes into Russia. Though the official exchange rate almost did not change on the «black» market, one dollar is estimated at 250-300 rubles.

It is believed that the devaluation of the ruble by 10% leads to inflation by 1%. Accordingly, the fall of the ruble will lead to a «weight of wallet», a reduction in real household income, and a reduction in effective demand.

2. Reduction in the supply of imported products, a sharp narrowing of supply, shortages of certain goods.

According to FourKites, since the beginning of the war, imports to Russia have fallen by 59%, including imports of household goods and industrial goods.

3. Inflation. A reduction in supply is always an increase in prices. 

First, the rise in prices will affect the «middle-class urban family», which has a high share of imported products in the consumer basket. Due to sanctions and inflation, the consumer line is expected to change in the long run, namely simplification, fewer high-tech products, and an increase in the share of Chinese and Indian goods (medicines, gadgets, cars, etc.). 

In villages with conventionally grown potatoes, locally produced pasta, oil, and sugar, it may be a little easier at first. However, with a certain time lag, prices will rise for everything, including domestic products. And for low-income people, whose consumer basket consists mainly of food and medicine, the consequences will be the most traumatic. 

Inflation is hitting the poorest. But the poor are not a protest power. The likelihood that they will join the protest audience remains low. It is most likely that 70-80% of the population will suffer, trying to «squeeze» something out of the state and thus become even more dependent on the state.

4. Fall of the industry: decline in production, fall in employment, unemployment. The largest hit by the sanctions is the aviation sector, the automotive industry, mechanical engineering, the electronics sector, the oil, and gas sector (its modernization), and metallurgy. The more technological the production, the higher the share of imported components, and, accordingly, the more it will suffer from sanctions.

If the shutdowns take place, it will have a multiplier effect on the economy. And this can be disruptive. e.g., The Russian car industry employs about 300 thousand people, and another 700-900 thousand are employed in Russian companies that are suppliers to the car industry.

5. Falling incomes and employment in services. The first thing that consumers save on when real incomes are reduced are services: beauty salons, fitness centers, catering, restaurants, recreation, and more. The tourism sector is likely to fall. A decline is expected in trade. This is an important part of the Russian economy: the share of wholesale and retail trade is almost 12% of GDP and 15% of all employees. 

6. A blow to the construction and real estate market. About 40% of Russian companies have already frozen their construction projects across the country. This is due to the imposition of sanctions against Russia, which leads to disruptions in the supply of construction materials, their shortage, and a rise in price. According to experts, since the beginning of the war, the cost of building materials has increased in some segments by 80-100%. Some companies decide to freeze some projects indefinitely and redirect resources to complete near-completed projects.

7. In Russia, it is planned to transfer to the state assets owned by foreign companies that have left the market. The Public Consumer Initiative has created a list of 59 companies that can be nationalized, including McDonald’s, Volkswagen, Apple, IKEA, Microsoft, IBM, Shell, Porsche, Toyota, H&M, and others.

8. Exit from partnerships of oil and gas foreign partners. I am not going to name all, just a couple: 

  • BP sells a stake in Rosneft (19.75%).
  • Shell is leaving the joint venture with Gazprom and is terminating its participation in the Nord Stream-2 project.
  • Exxon Mobil stops oil and gas production in Russia (on the island of Sakhalin) and stops new investments. The company leaves the Sakhalin-1 consortium and recalls American specialists from Russia.

What is critical here is that companies are leaving with their own technologies, including offshore drilling technologies for gas production, which Russia needs to develop new fields.

9. Sharp increase in interest rates on loans and lack of working capital in the business.

10. Reduction of microcredit (lending for those who cannot reach the next salary). People who live from salary to salary cannot get a loan today. This is again a factor in the growth of poverty, the barbarism of the population, and the growth of crime.

Russia’s economy is going down. Experts talk about the beginning of the economic winter in Russia, use the term “Iranisation” of the Russian economy, and draw parallels between Russia and North Korea.

Current sanctions have critical consequences in terms of living standards and quality of life in Russia over the next 10 years. Lack of prospects, opportunities to realize their life potential, the need to survive instead of making plans for the future and development – all this calls into question the feasibility of life in Russia on the horizon of 5-10-20 years and makes the issue of emigration more relevant than ever. Summing up in one sentence, we can say that «Vladimir Putin stole the future from the Russians.»

At the same time, the basis of internal stability in Russia is Putin’s personal image and absolute trust in him PERSONALLY by the population, not the government, parliament, or government as a whole. It holds an elite consensus, as well as a social contract in Russia, which he himself guarantees and embodies.

I would like to finish again with images of BUCHA – a beautiful town near Kyiv that made me sick on Saturday evening and the entire day yesterday. People’s lives cannot wait for another 10 years so that the current status of sanctions works slowly and mildly on society which Putin created in russia and people accepted by voting for him for 22 years and western society inviting him every time to the table. There is a huge moral dilemma in what we currently experience, there is a huge challenge to democratic order with respect to Human dignity, freedom of speech, and free society which Europe was building for many years. 

There are many concerns: what if the situation engages more countries, what if we give more military weapons to Ukraine, what if… many more what if? But I would like you to ask yourself – What if Ukraine loses? Everybody in the free world will lose, as when they come here they will do the same as they did in BUCHA. 

Foodback Loop: Developing Sustainable Food Systems for a Circular Society

By Bruna Carvalho and Lucia Reisch

◦ 4 min read ◦

The Sixth IPCC Assessment Report warns that crops are more frequently lost due to extreme weather conditions than ever before. At the same time, communities across the globe are facing increased – and in many cases acute – food insecurity.

Feedback loops in food production may increase future food insecurities

While suffering the consequences of climate change, our food systems also act as major contributors to it by accounting for one-third of the global greenhouse gas (GHG) emissions caused by human activity. This potentially creates a feedback loop where food production increases GHG emission, which in turn accelerates climate change leading to more extreme weather events that threaten and damage crops, reducing food availably and increasing food insecurity, which increases demand for food production and takes us back to increased food GHG emission stemming from food systems. Something like the diagram below:

Figure 1: Example of a feedback loop within a food system
Figure 1: Example of a feedback loop within a food system

This is, of course, a snippet of much more complex food systems of provision out there. A full assessment of these systems would consider other elements such as biodiversity, water use, mass production and small scale agriculture, health and nutrition, culture, local, regional, and global scale systems, to mention a few.

The chain of actions and reactions shown in the diagram are what we call a feedback loop, where elements of a system interact, amplifying or dampening each other’s effects. This may sound complicated but becomes easier to grasp through examples. Referring once more to the diagram above, it is easy to see how producing more (+) food could lead to increased (+) GHG emissions, while enduring more (+) extreme weather events could damage crops and reduce (-) the availability of food. This is useful when analysing complex systems and especially handy when it comes to developing solutions that can disrupt a link in the system hence leveraging change towards a desired state.

Mainstream food systems are designed to operate in positive feedback loops – and that’s not positive

As illustrated in our diagram, the current mainstream food system is designed to operate in a positive feedback loop, where the word positive (unfortunately) does not mean something nice or beneficial, but instead that the relationships within the loop (and possibly the whole system) create a snowball effect. This is certainly not what we want. To go in the direction of operating within the planetary boundaries, we must work on the links that offer the most leverage for change (preferably with the least use of resources), and ideally operate only with bounded trade-offs.

A previous BoS article on the importance of food systems for building resilient societies highlighted two major behavioural changes that substantially mitigate greenhouse gas emissions from food systems: avoiding food waste and dietary shifts to plant-based nutrition, which can be leveraged by individual choice.

“Because individual choices are the basis of any healthy and sustainable food system, understanding and influencing consumer behaviour is a promising route to achieving sustainability, resilience, and healthfulness of our food systems and society generally”.

In this sense, we envision that nudging people into making more environmentally friendly food choices will lower “GHG emission” stemming from food systems and will have a beneficial impact on the other elements with which it interacts due to the nature of feedback loops and systems.

The BEACON project explores pathways to shift to a sustainable food system

But how can we move consumer-citizens towards more sustainable diets and reduced food waste? Moreover, how can we design a more resilient food system and food environment? These are the questions we seek to answer in partnership with the City of Copenhagen through the BEACON Project (funded by the Novo Nordisk Foundation). Here, we work in connection with actors who directly and indirectly shape the city’s food environments to employ interventions in real-life settings, which we expect will enhance the experiments’ validity, yield useful results, and increase engagement and “buy-in”. By finding the answers to these questions, we expect to contribute to developing pathways for change and to harnessing and advancing behavioural insights (nudges) that can inform people-centric food and health public policies as well as mitigation efforts by the private sector. We also expect our findings to apply to other systems of provision beyond food.

Developing a circular society

Ultimately, we aim at further developing the concept of a circular society, which builds on the concept of circular economy but is more far-reaching. Circular societies consider less material forms of value creation, are sustainable, just, resilient, deliver social wellbeing within the planetary boundaries and operate in a balanced state among the biosphere, the sociosphere, and the technosphere (Figure 2).

Figure 2: Circular Society. Source: BEACON Project

Given that societies are collectively built, our ambitious goals can only be achieved through open dialogue and collaborative work with practitioners, policymakers, researchers and civil society. If you would like to contribute to this discussion, you are most welcome to write to us here.

Further readings

Climate Change 2022: Impacts, Adaptation and Vulnerability. Working Group II Contribution to the IPCC Sixth Assessment Report

Reisch, L.A. (2020) How to make food systems more resilient: Behavioural Food Policies. BOS Blog

Reisch, L. A. (2021). Shaping healthy and sustainable food systems with behavioural food policy. European Review of Agricultural Economics.

Bauer, J. M., Aarestrup, S. C., Hansen, P. G., & Reisch, L. A. (2022). Nudging more sustainable grocery purchases: Behavioural innovations in a supermarket setting. Technological Forecasting and Social Change.

About the authors

Bruna Carvalho is Research Assistant at Copenhagen Business School. She brings research experience in the areas of transformational sustainability entrepreneurship, policy reviews and road mapping for sustainable public procurement, and transdisciplinary research in the field ecosystem conservation in partnership with the Waorani indigenous people (Ecuadorian Amazon). As a practitioner, she founded the Sustainability Commission of the Brazilian Federal Justice (State of Paraná), where she acted as Commission Secretary for three years.

Lucia Reisch is the El-Erian Professor for Behavioural Economics and Public Policy at the University of Cambridge, the founder of the Consumer and Behavioural Insights Group (CBIG) at Copenhagen Business School, Department of Management, Society and Communication, and the principal investigator of the BEACON project. She is a behavioural economist and social scientist and one of Europe’s leading academic experts in behavioural insights-based policies for sustainability. Lucia is an Editor of the Journal of Consumer Policy (SpringerNature) and a founding Editorial Board Member of the Journal Behavioural Public Policy (Cambridge University Press) as well as a member of the Editorial Board of Food Policy (Elsevier), among other editorships.

Photo credit: Scott Goodwill

Innovation as a Survival Mechanism during the COVID-19 pandemic: Successful examples from the foodservice industry

By Anna Sophie Hauge, Marie Haadem and Meike Janssen

◦ 4 min read ◦

Innovation fosters creativity and generates growth – especially in times of crisis. The foodservice industry has been hit extremely hard by COVID-19 and the corresponding restrictions and lock-down measures. While many businesses in the foodservice industry struggled to survive, some took the opportunity to innovate. The question is then, what drove businesses to innovate in the middle of the crisis?

Drivers of firm innovation and the outcomes differ from case to case, however all can be connected to overarching themes. The external shock of the COVID-19 crisis is undoubtedly one such theme which has created new environments for supply and demand within the foodservice industry.

…times of crisis may provide an opportunity to develop dynamic capabilities more quickly than good financial times. A possible explanation is that ‘dynamic environments’ are needed to deploy dynamic capabilities

Alonso-Almeida et al., 2014

In the spring of 2021, we interviewed five courageous food-entrepreneurs, all using innovation as a survival mechanism throughout the crisis. We used John Bessant and Joe Tidd’s 13 drivers of innovation as the starting point to have a closer look into five small- to medium-sized innovative companies from Copenhagen and Oslo: a gourmet pizza takeaway, an online grocery delivery, an online fruit and vegetable delivery, a vegetarian takeaway, and a café takeaway. 

Besides the crisis itself being the most powerful driver of innovation, the need for change in the way people consume and offer food services proved to inspire numerous innovative measures (See Table 1). The trends and environments created by COVID-19 inspired new processes within our pre-existing case firms. For the three firms established pre-COVID-19, a large focus was put into the implementation of contactless home deliveries.

Additionally, we found that the crisis even triggered the innovation of completely new businesses. The two we interviewed exploited the rapidly changing environment to meet new needs, employing pandemic-friendly formats to deliver their services. An example is the highly integrated use of Instagram as a food ordering and communication platform. Innovation of business processes and products became survival means for our firms within the foodservice industry, as it helped them keep up with new consumer needs in the context of the pandemic. At the same time, these changes elevated the firms’ value propositions due to the new operating circumstances imposed by COVID-19. Products and processes were adapted to the COVID-19 trend of ‘support your locals’ throughout lockdown, through the integration of local suppliers and products. Innovations in relation to such trends helped target important social values during the pandemic.

Many of the innovations within the case companies originated from the necessity of minimizing the spread of the COVID-19 virus. Changes to the physical spaces of the foodservice firms and higher focus on contact through digital channels are examples of measures taken.

Characteristics of Success

Four out of the five firms were small in size. Each firm utilized collaborative relationships in the development of their products and services during the pandemic. Congruently, these firms explored new market opportunities; both in the expansion and adaptation of product lines and services, but also starting completely new businesses. Another characteristic was the integration of technology, such as online ordering and social media communication. We also found that the firms innovating during crises did not compromise on costs in their innovations. Ultimately, these characteristics developed and supported the firms’ crisis-driven innovation. It was also recognized that the pre-existing firms were innovative also before the crisis, which helped facilitate their innovation in times of distress. These characteristics are identical to those found in companies that innovated during the financial crisis in 2008.

Two additional characteristics were identified in the firms; firm flexibility and targeting niche segments. High flexibility was identified within the case firms, introducing options for pre-ordering, and thereby allowing for efficient and sustainable use of resources. Firm flexibility was also created through the use of digital modes of operations like online communication platforms and ordering systems. Lastly, four of the case firms have niche and urban customer segments. They target a trendsetting, educated urban-elite, all living in central Copenhagen or the West End of Oslo. Both the firms’ business models and unique selling propositions are non-typical for the given industry. Having such target groups and trend-setting concepts is seen to have enabled successful innovations. These two firm characteristics arguably provide the necessary infrastructure for the innovations’ success and are recognized to be essential for firm survival in times of crisis.

In the end

It is inspiring to see that times of crises can inspire people, and that courageous steps are being rewarded in a dynamic environment with open-minded customers. However, not all cafés and restaurants were as lucky as the ones in our study. Now that restrictions are no longer in place, the foodservice industry deserves our support, and you deserve to regularly treat yourself to a nice dinner or lunch.

About the Authors

Anna Sophie Hauge is studying her master’s in Finance and Strategic Management at Copenhagen Business School. Outside of her studies, she is currently working as a commercial student analytic at Løgismose, a Danish food brand, focused on quality and ecology.

Marie Haadem is currently finishing her Master’s in Management at IE Business School in Madrid, specialising within Finance and Investment. She will be joining Citigroup this July as a Banking Analyst for the EMEA Banking Analytics Group in Spain.

Meike Janssen is Associate Professor for Sustainable Consumption and Behavioural Studies, CBS Sustainability, CBS. Her research focuses on consumer behaviour in the field of sustainable consumption, in particular on consumers’ decision-making processes related to sustainable products and the drivers of and barriers to sustainable product choices.

PhPhoto by Kai Pilger on Unsplash

Sustainability enabler or complexity blinder?

By Milena Karen Bär & Dr. Kristjan Jespersen

◦ 5 min read ◦

The first step of the EU Action Plan of Sustainable Finance

New regulations in the ESG sphere are on the upswing especially in the EU. To reach the commitments of the Paris agreement, the European commission has introduced new regulations as the first step of the EU action plan: the Sustainable Finance Disclosure Regulation (SFDR). The first level was already implemented on March 10th 2021. The implementation of the regulation is an extension of the EU Taxonomy, amending the issue of greenwashing among financial market participants (FMPs). The new reporting requirements are profound and will be fundamental to almost any participant on the European markets, whether you are in the financial, or for that matter, the manufacturing, retail, service, non-governmental and governmental sectors.

The European Union’s experiment in defining what is sustainable and in directing markets to more sustainable investments, is putting pressure on market players to keep up with the quickly paced regulative developments.

Two main issues are subject to the debate of appropriate implementation of the SFDR, which entail firstly, the uncertainty of product classification and secondly, the complexity of data collection and usage. Not only all those affected must revise their whole reporting regime, but the EU must ultimately also ask itself the question whether the regulations have nurtured the intended behavior of the market. 

SFDR and PAI in general

The SFDR is implemented to benefit clarity for investors and asset managers, by improving their ability to compare investment options from a sustainability point of view. Therefore, the SFDR provides a collective framework, which requires FMPs to disclose the way they are taking sustainability risks into consideration in its business practices (entity level) and in its financial products (product level) in a consistent and curated fashion.

Additionally, the FMP must report on the principal adverse impacts (PAIs). These contain a list of mandatory and voluntary adverse impact indicators, covering environmental issues and the field of social and employee matters, respect for human rights, anti-corruption, and anti-bribery matters. Based on the SFDR disclosures, the product offerings can then be classified within the three categories referred to as article 6, 8, or 9 products, which indicate the level of greenness ranging from article 6 which does not consider sustainability at all, and article 9 which must follow a sustainable objective.

Issues arising 

The objective of the EU Action Plan and the SFDR is to reorient financial capital towards sustainable products and solutions. However, certain challenges raise the question whether the regulation can indeed serve this very purpose. To begin with, the mechanics of defining light and dark green products is lacking a foundation and boundaries, allowing for self-interpretation. The differentiation between light and dark green is ambiguous, and thus instead of serving as a guideline, is increasing uncertainty about what the articles constitute. 

Issue 1: The color palette of light and dark green assets

One might say, just as colors are perceived differently by each human, light and dark green assets can be various shades of green and thus, on completely different sustainability levels. The regulatory product declaration is not yet methodologically sound, the lack of distinction of the two leaves room for interpretation of the classifying entity. So far, no specific classification mechanism or framework exists that FMPs can apply and are thus able to approach the classification in more prudent or more generous ways. One may put a product under article 8, while at the same time another FMP might classify the same product under article 9. 

It seems the darkness of green is up for preference of the asset manager. Although there may be consensus that exclusion strategies are minimum requirements for both classifications, the scope of exclusion criteria varies greatly. This allows for instance some article 9 products to still be involved in controversial actions, such as fossil fuels, tobacco, and controversial weapons. 

Secondly, collecting relevant data poses a challenge, and even if data is available, its variety used to report on the SFDR and the PAI, makes the curation inconsistent and biased. An investor might have a full PAI statement to assess its investment, but can one trust the accuracy and relevancy of the data? 

Issue 2: Quality of data fades into the background

The PAI statements can be considered as a curation tool for asset managers (AM) to filter for the most sustainable products and steer capital towards green transition products. Even though the framework of the PAI indicators might be well structured, what is important is the quality of inputs. But the complexity of PAI indicators poses challenges for almost any market participant. PAI data is often not readily available, and this is aggravated by the fact that this data needs to be tracked on a continuous basis. Data collection and maintenance can thus become costly for the underlying portfolio companies. Large cap companies can overcome this issue, but small cap players are confronted with an expensive data collection for a wide range of PAIs or with the need to opt out due to lack of data availability.

Hence, large cap companies may gain competitive advantage without indicating greater performance. AMs incorporate the PAI data in a screening process to extract the most responsible products of the investment universe. However, some asset managers are simply selecting those assets with the highest coverage of PAI indicators. Again, leaving large cap companies in favor, although the high coverage of indicators not necessarily correlates with sustainable performance. The quality of the data fades into the background and investments with higher sustainable and financial potential can be missed out on. Ultimately, businesses leading the market today, may stay right where they are, without enabling opportunities for more innovative and greener solutions.

While the intention of the SFDR is to further restrict greenwashing, current practice may raise the question whether there are still loopholes for FMPs to label their products as greener as they actually are. Although we have seen regulations to be great drivers of sustainable corporate and market action, guidelines must be established to provide more specific and narrow pathways. The weak structure of product classification and the complexity of data may prevent the SFDR to provide a framework for more coherent and uniform information of sustainability risks. The European commission must clarify actual implementation practices, to enable the entire effect of capital reorientation. No market participant is exempted from the need to be aligned with the SFDR today, as new waves of regulations will follow, and it is to start paddling.

About the Author

Milena Karen Bär is a student researcher in ESG and Sustainable Investments, absolving a Master’s degree in applied Economics and Finance at Copenhagen Business School. Her research projects are mainly within the field of ESG metrics and regulation, with a focus on the investor’s side.

Kristjan Jespersen is an Associate Professor at the Copenhagen Business School. He studies on the growing development and management of Ecosystem Services in developing countries. Within the field, Kristjan focuses his attention on the institutional legitimacy of such initiatives and the overall compensation tools used to ensure compliance.

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How do we think about sustainable investing? Suggestions from an exploratory study

By Margherita Massazza & Dr. Kristjan Jespersen

◦ 4 min read ◦

From the outset, this blog post takes the perspective that behavioral finance is required to assess the perceived tension in sustainable investing (SI). Our work investigates the extent to which sustainability considerations are included in investment decisions, and the drivers behind SI approaches.

Sustainability is increasingly integrated in financial markets, with the acronym “ESG” (Environment, Social, Governance) becoming an all-encompassing term widely used in all phases of the investment process. According to a recent global review, sustainable assets [1] reached USD 35.3 trillion at the end of 2019, representing 35% of total professionally managed assets, and they are set to grow further in the coming years. Yet, despite its growth and the positive sentiment associated with it, there is an inherent tension in sustainable investing.

This tension stems from the apparent disconnect between the theoretical assumptions of classical financial models, focused on risk and financial returns as the predominant determinants of investment decisions (e.g., Capital Asset Pricing Model, Modern Portfolio Theory, etc.), and the empirical evidence of SI, where portfolio allocations are affected by non-financial aspects like personal values and social pressures. How can we make sense of this tension? 

Usually, the contradiction is formulated in terms of a tradeoff between financial returns and ESG impact: in order to achieve one, investors must forego the other. However, this view is still rooted in a traditional finance perspective, according to which including ESG considerations or seeking a non-monetary impact comes at the expenses of returns.

There needs to be more nuance in how sustainable investing decisions are investigated and assessed. Given the pervasive and engaging nature of ESG issues, sustainable investing is likely shaped by internal and external forces that go beyond the financial-vs-impact debate. By acknowledging the role that cognitive limitations, biases, and the external context play for investments, behavioral finance allows to capture the financial impact of factors that tend to be overlooked in mainstream financial theories. 

Under this perspective, the authors carried out a study based on primary data from European retail and professional investors. It focused on two main questions:

To what extent are sustainability considerations included in investment decisions?

Firstly our analysis broke down the relative importance of four attributes for the investment choice, i.e. the relative weight (expressed in percentage) that each characteristic exert on the investment decision. Sustainability attributes carry a relative importance of about 38%, with ESG score displaying a 26% relevance, and the investment’s end objective a 12% relevance. Taken together, these parameters display a larger role than standard financial attributes of risk level (relative importance of 33%) and expected returns (relative importance of 29%) (Figure 1). The results confirm the significance of ESG aspects for a well-rounded assessment of an investment, arguing against the traditional perspective of risk and returns as the sole determinants of investment choices.

Figure 1 – Relative importance of investment attributes for investment choice, by investor type
What drives investors to invest sustainably?

Secondly, we identified the main tendencies leading investors to engage in SI. Starting from a set of 16 heterogeneous motives, 4 main drivers emerged: a desire for self-expression, a financial-strategic rationale, the influence of the external context, and an opportunistic motive (Table 1). These drivers depict SI as a multifaceted phenomenon that unfolds along various dimensions, and not only on the financial and impact layers. They propose a novel perspective to think about SI, which takes into consideration how endogenous (e.g., alignment with values) and exogenous (e.g., role of regulation) forces may affect investments. 

Table 1 – Drivers of Sustainable Investing
How can the findings help us better assess sustainable investing?

This analysis shows the extent to which ESG aspects are integrated in investments, confirming their importance for investment choices. It also shows the multidimensionality of SI drivers, which eschews the rigid perspective of traditional finance and accounts for the impact of relevant internal and external factors. 

With this understanding, it is possible to formulate practical insights for industry participants to address the current challenges of SI. In fact, there are concerns related to the over-inclusion of sustainability in investment decisions at the expenses of fundamental financial analysis, which may lead to mispricing, inflated asset evaluation, and potentially an “ESG bubble”.

  • Standardize definitions and improve sustainability communication. Social context emerged as one of the drivers of SI, and regulators have a strong role to play in harmonizing the meaning of sustainability in finance. Legislative and non-governmental bodies are working to overcome the lack of standard definition and frameworks in SI – e.g., via the European Union’s Sustainable Finance strategy. Their effort to create a common vocabulary and shared understanding of what SI entails will help to align incentives, concepts, and strategies. In parallel, the financial-asset supply side (e.g., fund providers, financial advisors, etc.) should communicate clearly and extensively on the sustainability aspects of financial products. Given the importance of ESG characteristics for investment choices, this will ensure investors have reliable and trustworthy information to guide their investments. Together, the agreement in terminology and the availability of sustainability information will reduce the possibility for misinformation and opportunistic tendencies to sway investment decisions.
  • Recognize the existence of complex drivers behind sustainable investment decisions. Investors, both professional and retail, should evaluate how different motives affect their investment choices. Knowing that multiple drivers exist will ensure that investment are aligned with goals, limiting the influence of irrationality and misinformation. This will not only benefit investment strategies, but also curb counter-productive results such as the emergence of an ESG price bubble. To explore what drives investor’s decisions, an ad-hoc survey could be submitted ahead of opening investment accounts, mirroring the logic of the MiFID directive. This may have positive effects, such as involving more retail investors in sustainable investing [2].
  • Finally, consider adopting a behavioral approach when studying sustainable investing. The flexibility of behavioral finance may allow to grasp further insights and help to think about this timely topic in a novel way.

References

[1] The Global Sustainable Investing Alliance (GSIA) considers defines “Sustainable” all assets that integrate ESG factors in the analysis and selection of securities. More detail in their latest global report.

[2] Retail investors still face barriers to fully engage in SI: the topic is investigated in the paper “Investment Barriers and Labeling Schemes for Socially Responsible Investments” by Gutsche and Zwergel (2020).

About the Authors

Margherita Massazza is a CBS and Bocconi graduate in Economics of Innovation, with a focus on Sustainability. Her research investigates the links between traditional investments and behavioral finance to understand how sustainability decisions unfold. She is currently working in the Foresight team of AXA, an insurance company, where she studies the role that corporations will play in the future and how the concept of sustainability will evolve. 

Kristjan Jespersen is an Associate Professor at the Copenhagen Business School. He studies on the growing development and management of Ecosystem Services in developing countries. Within the field, Kristjan focuses his attention on the institutional legitimacy of such initiatives and the overall compensation tools used to ensure compliance.

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No Trees, No Future: How can we unlock the full potential of conservation finance?

By Dr. Kristjan Jespersen, Dr. Izabela Delabre, Dr. Caleb Gallemore, and Dr. Katryn Pasaribu

◦ 3 min read ◦

Tropical deforestation continues at alarming rates, with 12 million hectares of tropical tree cover loss recorded in 2018. Much of this deforestation is linked to large-scale agricultural development. Palm oil companies are seen as key deforestation culprits due to high-profile media campaigns being led by NGOs and, in response, recent years have seen the proliferation of private sector pledges and initiatives to address deforestation in the palm oil value chain. There has also been growing international focus on forest conservation in the context of climate mitigation, with countries at 2021’s United Nations Climate Change Conference (COP26) pledging to halt deforestation by 2030. Multi-billion dollar initiatives, such as the Bezos Earth Fund are investing in nature-based solutions to address climate change, including through the protection and reforestation of forests and other ecosystems. 

Given these ambitions, an important question for corporate sustainability and conservation research and practice is how to link financing mechanisms for conservation and value chains, two policy streams that are generally disconnected. Actual methodologies for understanding appropriate, long-term financing for forest conservation remain elusive, and this knowledge gap hinders the clear assignment of responsibility, accountability and sustainability of conservation efforts.

Articulating “conservation finance” (the “mechanisms and strategies that generate, manage, and deploy financial resources and align incentives to achieve nature conservation outcomes”) with value chains could help align incentives between actors and facilitate increased financial flows from the private sector to conservation. 

Introducing No Trees, No Future – new research project

An ambitious new research project “No Trees, No Future – Unlocking the full potential of conservation finance”, funded by the David and Lucile Packard Foundation, seeks to design and test a rigorous methodology for understanding the responsibility for conservation finance of influential firms in the palm oil value chain. It addresses important knowledge gaps that currently impede effective conservation finance, examining questions such as: Which firms are responsible for financing conservation? What are the motivations of firms to engage in different types of conservation finance initiatives? To what extent are companies willing to internalize conservation costs? What might cost-sharing models look like? 

This novel, interdisciplinary research project uses a mixed-methods design that combines in-depth case studies, surveys and remote sensing to explore how the costs of conservation may be shared effectively and equitably between palm oil value chain actors, and provides a resource for external stakeholders seeking to identify firms’ contributions to land cover change, in Indonesia to start with.

The research will involve the development of data-intensive methods to assess the spatial footprint of the supply chains of a set of lead firms in the oil palm value chain, as well as in-depth interviewing of stakeholders across the palm oil value chain to identify the feasibility and possible impacts of adopting new methods for conservation finance. 

Our goals are: (1) to develop a methodology that can be readily applied to estimate lead firms’ responsibility for contributing to conservation finance in the palm oil sector, and (2) that business models and strategies integrate conservation finance effectively, supporting more equitable cost sharing. 

The research will identify several possible models for assessing spatial footprints of firms’ supply chains in the oil palm sector, testing their feasibility with a selected group of investors and conservation project proponents. Following this initial project, which focuses on the palm oil value chain, we intend to explore possibilities in other commodity sectors, and how to scale up efforts to support effective and equitable conservation finance.

To what extent will companies be willing to absorb the costs of conservation finance into their supply chain transactions? How might potential barriers be overcome? It is our intention that the project contributes to companies taking on greater responsibility for conservation finance, embedding long-term conservation costs into the palm oil value chain (that are currently externalized), disrupting ‘business as usual’ to support forest conservation, given their critical role in climate mitigation and biodiversity conservation. 

We will share our interim findings on this blog as the project progresses. We would be delighted to hear from researchers from different disciplines and practitioners working in this field. If you have any questions or comments, please get in touch! 

About the Authors

The two-year project is led by Dr. Kristjan Jespersen, Associate Professor at the Copenhagen Business School (CBS). The research team includes Dr. Izabela Delabre, Lecturer in Environmental Geography at Birkbeck, University of London; Dr. Caleb Gallemore, Assistant Professor in the International Affairs Program at LaFayette College, Pennsylvania; and Dr. Katryn Pasaribu, seconded from Universitas Prasetiya Mulya to CBS.

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EU proposal on Corporate Sustainability Due Diligence for human rights and the environment

Advancing responsible business conduct, but failing to consider key functional challenges for remedy

By Karin Buhmann

◦ 9 min read ◦

Why is the proposal important?

The EU Commission’s draft Directive on mandatory ‘corporate sustainability due diligence’  published in the end of February is already recognized to have the potential to become a game changer for responsible business conduct (RBC) in Europe and beyond. If adopted, the proposed Directive will turn international soft law recommendations for companies to exercise risk-based due diligence in order to identify and manage their harmful impacts on human rights and the environment into hard EU law and therefore binding obligations for companies. Companies will be required to exercise due diligence with regard to actual and potential human rights adverse impacts and environmental adverse impacts, with respect to their own operations, the operations of their subsidiaries, and the value chain operations carried out by entities with whom the company has an established business relationship. 

The proposal also aims to establish accountability through corporate liability for violations related to insufficient due diligence.

What the draft directive refers to as ‘corporate sustainability due diligence’ draws on what the OECD Guidelines for Multinational Enterprises refer to as ‘risk-based due diligence’, and what is referred to as ‘human rights due diligence’ by the United Nations (UN) Guiding Principles on Business and Human Rights (UNGPs). Indeed, the proposal refers directly to those two international soft-law instruments, which are generally considered state of the art for responsible business conduct (RBC).

This form of due diligence is a process to identify, prevent, mitigate, remedy and account for risks or actual harm caused by the company (or its partners) to society. Unlike financial or legal liability due diligence, the focus is not on risks to the company, although of course societal (including environmental) harm may also affect the company negatively (see also Buhmann 2018). 

For companies covered by the directive, this will fundamentally change RBC from being voluntary to becoming legally binding. 

The Draft has generally been welcomed by business associations, although some remain hesitant towards a (much watered-down) proposal to strengthen top-level sustainability corporate governance. Civil society also generally approve although the range of companies covered has been criticized for being too narrow, and business relations too focused on contractual relations rather than impacts. The proposal’s introduction of civil liability with EU courts for victims from non-EU countries has been lauded. Yet this could and perhaps should also usher in a deeper debate on the fundamental characteristics of what constitutes adequate or meaningful remedy for harmful impacts on human rights impacts or the environment, and as importantly, how host-country victims will be ensured a de-facto equal standing with frequently well-resourced EU companies in front of EU courts. This short note addresses all of the above issues.

Part of EU corporate sustainability law

After a slow start up to around 2011, the EU has been moving fast since in an incremental development of increasingly detailed obligations on companies, including institutional investors, with the aim of creating transparency on business impacts on human rights, the environment and climate. Given the speed and political support for adopting EU law on these matters, it is quite likely that the proposed Directive will be adopted, although possibly with some changes. 

The proposal forms part of the larger package of corporate sustainability legislation undertaken by the EU recently. This includes the Taxonomy Regulation (which also refers to procedures that companies should undertake to ensure alignment with the UNGPs ad OECD Guidelines); the Non-Financial Reporting Directive (requiring some information on due diligence and risk assessments on human rights), which is expected to be replaced by the Corporate Sustainability Reporting Directive; and the Disclosure Regulation, which requires financial product providers to publish certain types of sustainability related information, including information on due diligence related to harmful impacts on environment and human rights.

The draft Directive builds on a proposal from the European Parliament, but it also follows trends in several individual EU countries to introduce mandatory risk-based due diligence. 

What companies are covered?

The draft Directive applies to ‘very large’ EU based companies (more than 500 employees on average and a worldwide net turnover exceeding EUR 150 million). ‘Large’ companies (having more than 250 employees on average and more than EUR 40 million worldwide net turnover) are included if they operate in specific high-risk sectors: textiles (including leather and related goods), renewable natural resources extraction (agriculture, forestry and fisheries), and extraction of minerals.

The draft Directive’s listing of activities related to minerals is quite wide and applies regardless of the place of extraction. They will therefore apply to many types of raw-materials used in the EU, including those used for power and heating, construction and the ‘green’ energy transition.

Non-EU-based companies are covered if their turnover in the EU corresponds to that of ‘very large’ companies, or that of high-impact sector companies for activities in those sectors. It is expected that requirements will be cascaded onto SMEs through the value chains that they are part of. 

What are companies required to do?

Importantly, like risk-based due diligence and human rights due diligence, corporate sustainability due diligence is not a compliance obligation simply discharged by undertaking and documenting a specific action.

Rather, as established by the UNGPs and the OECD Guidelines, it is an ongoing task that requires continuous assessments of risks or actual harm, and re-assessments, follow-up and efforts to prevent risks from becoming actual harm, and mitigation and the provision of remedy when harm has occurred.

Although the draft Directive seeks to establish that, it does rely heavily on companies applying contractual assurances, audits and/or verification. As argued by the expert organization SHIFT, these are not necessarily the best options for the purpose.

The due diligence obligations proposed are generally in line with the UNGPs and the OECD Guidelines, but in some ways narrower. This applies in particular to the limitation of some aspects of the due diligence process to what the draft Directive defines as ‘established business relationships’, i.e. relationships of a lasting character. This contrasts with the UNGPs and OECD Guidelines which do not require a business relationship (e.g. with a contractor, a subcontractor or any other entity such as a financial partner) to be lasting but, rather, focus on the connection between the company and risk or harm. This is one of the points that have generated criticism of the draft. 

Directives must be implemented by Member States. The means that some specific requirements may differ across EU countries. However, regardless of this companies will be required to integrate due diligence into all their policies and have a policy for due diligence that describes the company’s approach, contains a code of conduct for its employees and subsidiaries, and its due diligence process.

This must include verification of observation of the code of conduct and steps to extend its application to ‘established business relationships’. In terms of specific steps, companies must identify actual and potential adverse impacts; prevent potential adverse impacts; and bring actual impacts to an end (whether they were, or should have been, identified) or minimize impacts that cannot be stopped. In that context they should seek to obtain cascading by seeking contractual commitments from business partners in the value chain.

However, contrary to the UNGPs’ recommendations, there is no requirement that the company actively engages with business partners in its value chain to enhance due diligence cascading. Moreover, the provisions on involving potential or actual victims (‘affected stakeholders’) meaningfully in the development of prevention action plans, let alone the identification and redress of risks and impacts, lags behind the UNGPs.

In line with the UNGPs and OECD Guidelines, ceasing business relationships is not considered the first option. Rather, collaboration should be sought in order to advance better practices. If that is not possible, cessation a relationship may be appropriate.

Companies must also set up a complaints mechanism that can be used by affected individuals, trade unions and civil society organisations. Moreover, companies must regularly monitor their operations and due diligence processes, those of their subsidiaries and ‘established business relationships’ in the relevant value chain. They must also regularly report on these non-financial issues. 

Overall responsibility for the due diligence actions is charged on a company’s directors as part of their duty of care.

Enforcement: administrative and civil liability

Companies’ compliance will be monitored by authorities in each EU country. They may request information from companies and carry out investigations based on complaints by individuals or organisations, or on their own initiative. They may impose interim measures to try to stop severe or irreparable harm, and sanctions for violations of the due diligence requirements.

Companies will not be entitled to public support if they have been issued with sanctions under the directive. 

Importantly, companies can be subject to civil liability for damages resulting from a failure to adequately prevent a potential harmful impact or bring an actual impact to an end. Civil liability means that victims (or in the terminology of the UNGPs and OECD Guidelines: ‘affected stakeholders’) must themselves sue the company. 

A step forward for accountability and victims – but multiple challenges remain

The institution of civil liability for third-country victims in front of courts in EU-based companies’ home states is clearly an advance in regard to establishing formal accountability. However, the complexities of the legal system, especially for those seeking damages through civil liability, can hardly be overestimated. This challenge has been absent from most discussions leading up to the current draft Directive.

By contrast to criminal courts, civil courts generally make judgments based on the ability of one party to convince the court of its arguments. Research has shown that formal civil liability regimes tend to favour those who have the legal knowledge resources to do so. A market based good, legal expertise can be very expensive. The better the record in obtaining results that a client wants, the higher the cost. This may cause a highly problematic discrepancy between the possibilities of victims/affected stakeholders and companies to argue their case. Even if some victims are able to be assisted by civil society organisations, their legal expertise for arguing a case in court, or their resources to obtain such expertise, will not necessarily match those of companies.

Moreover, the civil liability regime focuses on economic damages and compensation. Although that may be relevant in some cases, in others a sum of money does not adequately redress harm suffered. Indeed, the UNGPs emphazise that remedy can take many forms of which economic compensation is only one. 

Arguably, the draft Directive falls short of adequately considering the situation of victims in non-EU countries in regard to having not just formal but actual meaningful access to justice in front of courts. It presents an approach to remedy that does not necessarily fit the complex situations and limited resources of victims/affected stakeholders. It is to be hoped that as the draft will be negotiated and amended towards the version that may be adopted, this issue will gain further prominence.

Conclusion 

The draft directive is an important development towards ensuring that companies based or operating in the EU take steps to identify and manage their harmful impact on the environment and on human rights, and to provide accountability. Although the draft does not cover all EU-based companies, it does cover the largest ones, and large ones in the textile, renewable and non-renewable natural resource extraction, all of which are known to be high-problem sectors. However, the affected stakeholder engagement, remedy and accountability provisions of the draft display too limited understanding of the situation of victims/affected stakeholders.

About the Author

Karin Buhmann is Professor of Business and Human Rights at the department of Management, Society and Communication at CBS, as well as the Director of the Centre for Law, Sustainability and Justice at University of Southern Denmark. Her research and teaching focus on sustainability and responsible business conduct (RBC) with a particular emphasis on social issues, especially in climate change mitigation, business responsibilities for human rights, and sustainable finance.

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How do we find the green elephant in the classroom?

By Lavinia Cristina Iosif-Lazar, Jens Riemer and Caroline A. Pontoppidan

“Environmental sustainability to be at the core of EU education and training systems” – So reads the latest recommendation from the European Commission to EU education ministers, which highlights that “learning for environmental sustainability is not yet a systemic feature of policy and practice in the EU.” How then do we better inform practice and policy? Where does one even start to look at what has already been achieved and what more needs to be done on environmental sustainability, especially in Higher Education Institutions (HEIs)?

Coupled with the complexities of incorporating sustainability in HEIs and the diversity of methods used by HEIs in advancing these efforts or curriculum  overhaul, the task of bringing about systemic change and reaching the targets set on climate mitigation and biodiversity can seem daunting. But this is where a good picture of where we are now and where we want to be, can make a difference. 

Global pollution of, among other things, air, soil, and water, increasing exploitation of the resources of the Earth, and global climate change are challenging nature, environment, and public health. Also, Denmark and the world are in the midst of a biodiversity crisis caused by man-made pollution and exploitation of natural resources and habitats, global spreading of invasive species, and climate change. The intensive exploitation of the open land, forests, coastal zones, and marine areas has caused nature to be fragmented and continuously exposed to a number of stress factors, which means that biodiversity is on a constant decline

(p.17)
The EU Context: broadly speaking, all education needs to be green

At the EU level, we do not lack initiatives that have brought into focus the greening of the curriculum and the need to address climate and environmenal issues at all levels of education and training. The European Education Area (EEA) is an initiative aimed at strengthened collaboration between European Union Member States to build more resilient and inclusive education and training systems. One of the five focus topics of the initiative centers on Green Education. GreenComp – The European Sustainability Competence Framework developed by the European Commission was one of the cornerstones in the educational scope of the European Green Deal. Published in January 2022 and aimed at providing a shared competence framework on sustainability to guide educators and learners, the framework can be used by member states as a reference when rolling out educational initiatives on sustainability. 

However, even with all the attention given to education initiatives, there is little  direct appealing to HEIs at the EU policy levelMost of the time, communication is directed towards the whole sector leaving the specific directionality of the initiatives to the individual Member States and HEIs are most often mentioned together with schools and other training institutions. The GreenComp report mentions Higher Education a few times but only to illustrate that Higher Education has succeeded in creating a focus on competences for environmental sustainability in relation to preparing the students to address sustainability challenges and opportunities in their working life.

The Danish Context: The Danish Ministry of Education and the Green Transition

In September 2020, the Ministry of Higher Education and Science, Denmark, published ‘Green solutions of the Future’, a strategy for investments in green research, technology, and innovation. It also highlighted the important role of close collaborations between knowledge-institutions and the business community. To get things moving, the Danish government decided to allocate research funds to boost green research and also bringing more focus on green study programmes.  

And the issue of what was happening in HEIs on  green research quickly became a focal point. In December 2021, the Danish Ministry for Education and Science sent a request for data on the work HEIs were doing to integrate green themes in educational programmes. The Ministry asked institutions to submit an overview of seven green themes and the coverage of those themes in their programmes. Among these themes, two were focused on energy production and effectiveness, and the others addressed agriculture, transport, environment, biodiversity and sustainable behaviour. 

The CBS Context: Green Themes in study programmes 

There are multiple ways in which HEIs can find out what content in their educational offerings addresses the green themes described by the Danish Ministry. The way in which CBS did it, was to build on already initiated course content analysis and expand it to include the seven themes. In the academic year 2021-2022, CBS offered 18 Bachelor (undergraduate) programmes, 36 Master (graduate) programmes, as well as HD, Executive and special Master programmes. This amounts to a lot of data to go through and analyse. Other universities or schools might face the same issue of data being both diverse and difficult to gather, but once it is gathered, the managing the amount of data can become a challenge. 

CBS used the qualitative research tool NVivo, to analyse and code data from courses in all CBS’study programmes. This was done by identifying specific key words related to the given seven green themes (see table below). The data collected was derived from study programme competency profiles, course descriptions and learning objectives. For every search result returned, the context was analysed and only relevant hits were then recorded in the respective codes. 

Theme 1Theme 2Theme 3Theme 4Theme 5Theme 6Theme 7
Energy productionEnergy effectivenessAgriculture and Food productionTransportEnvironment and Circular economyNature and BiodiversitySustainable behaviour and Societal consequences
How do Green Themes look like in a study programme at CBS?

Once the data was collected and the content analysed,  a relatively comprehensive picture emerged of how and where the green themes are present in a study programme at a European business school like CBS. 

Case 1 below, illustrates a visualization  of an anonymised bachelor programme. It presents how the seven green themes can be visualized so to give an “as is” picture. With this information, study programmes can dive deeper into the green content that they already have embedded in their programmes and/or identify that they are interested in additional integration of the seven environment themes into education.

Figure 1: Case 1 – Bachelor Study Programme A (BSc. A)

Bachelor Study Programme A had extensive coverage of Green Themes 5 through 7. The numbers in each cell of the below table represent the number of hits (keywords) per theme. Within the Bachelor Study Programme A, the green themes were identified in both mandatory and elective courses, in their respective course descriptions (CD) and learning objectives (LO). Environment and Circular economy, Sustainable development and Social consequences, as well as Nature and Biodiversity were the themes found represented in the Bachelor Study Programme A courses. 

The continuous loop: research, policy, strategy and the classroom 

The analysis and reporting of course content on green and environmental themes can function as a basis on which discussions about environmental sustainability in an institution’s educational activities can be taken. Getting this overview can inform further work to advance both content and scope that strengthens the advancement of environmental sustainability competences. These can later also find their way into regional strategies as well as inform policy makers at the International and European level. Having a well-informed stance on how, where and which environmental content and competencies HEI graduates obtain during their education can  highlight where efforts need to be targeted. This also means that HEIs become a part of the action on “greening” the curriculum and, in turn, can better inform policy makers and education initiatives.

The business school sector has much to build upon. Pioneering scholars have long focused on issues of the environment and sustainability. There has been a dramatic uptake in the last decade of attention to climate change by business scholars, encouraged by editorial statements and special issues in the leading journals in every one of our disciplines. In the classroom, these issues are increasingly being discussed in core and speciality courses, representing significant curricular shifts, and supported by our accrediting bodies

(Galdon et al., 2022)

To read the full report, please visit CBS PRME InFocus Report series: https://www.cbs.dk/viden-samfundet/indsatsomraader/principles-responsible-management-education/resources/prme-infocus-reports

References

Bianchi, G., Pisiotis, U. and Cabrera Giraldez, M., (2022). GreenComp: The European sustainability competence framework, Punie, Y. and Bacigalupo, M. editor(s), EUR 30955 EN, Publications Office of the European Union, Luxembourg, 2022.

Danish Ministry of Higher Education and Science (2020). Green solutions of the future – Strategy for investments in green research, technology, and innovation.

Galdón, C., Haanaes, K., Halbheer, D., Howard-Grenville, J., Le Goulven, K., Rosenberg, M., Tufano, P. and Whitelaw, A. (2022) Business Schools Must Do More to Address the Climate Crisis.

About the Authors

Lavinia Cristina Iosif-Lazar is a project lead on Principles of Responsible Management Education at the CBS Teaching & Learning Department. Lavinia’s work centres on curriculum development, climate and carbon literacy and systemic thinking in management education, as well as assisting in the development of teaching materials. 

Jens Riemer is a Green Transformation Officer at Copenhagen Business School, within Executive Support and Communcations. Jens works with the cross-cutting strategic initiative Green Transition, which focus on bringing together key players in establishing an organizational frame and initiate concrete problem-based research and educational activities.

Caroline A. Pontoppidan, Associate Professor department of Accounting & Academic director CBS PRME. Her research often engages with the institutionalization of global standards into local context – and challenges herein.

Photo by Alex Lvrs on Unsplash

CBS Permahaven: A new campus chapter

By Isabel Fróes and Maribel Blasco

◦ 2 min read ◦

Sustainability – finding ways to walk the talk

We report here on a new campus initiative to create a permaculture garden on the CBS campus, opposite the Kilen building and very close to Fasanvej Metro Station. CBS owns a piece of fairly large plot of land here that is currently unused.  

A design workshop was held on 4th March, where different groups of participants (students, faculty, representatives from Frederiksberg municipality and others) worked collaboratively on a design for Permahaven.

‘Permaculture’ stands for ‘permanent agriculture’, a term coined by Tasmanian Bill Mollison in 1978.  He defined it as:

“The conscious design and maintenance of agriculturally productive systems which have the diversity, stability, and resilience of natural ecosystems. It is the harmonious integration of the landscape with people providing their food, energy, shelter and other material and non-material needs in a sustainable way.” 

Permaculture offers a holistic framework for creating sustainable ways of living. It aims to integrate land, resources, people and the environment by maximizing beneficial relationships, observing, emulating and working with rather than against nature to enhance resilience, diversity, productivity and stability (Hopkins 2020; Permaculturenews.org 2020). Permaculture advocates three overarching ethics: earth care, people care, and fair share, and twelve design principles – the petals of the so-called ‘permaculture flower’ (see Figure below.

Permaculture Flower – The seven domains of permaculture action (https://permacultureprinciples.com/flower)

Ultimately, the goal is to foster responsible cultivation, production and consumption through a whole-systems approach. But permaculture is much more than that – increasingly, the concept is being applied beyond the field of agriculture to support and inspire more sustainable lifestyles, to improve mental health, sanitize consumption, and design livable, humane social systems (Blasco, forthcoming).

What can a permaculture garden bring to a business school? Regenerating learning through permaculture

More from the event

About the Authors

Isabel Fróes is a postdoc at MSC Department at Copenhagen Business School working in three EU projects (Cities-4-People, iPRODUCE and BECOOP). Isabel also has wide industry experience and has worked both as a user researcher and service design consultant for various companies in Denmark and internationally. For more detail please see her Linkedin profile.

Maribel Blasco is Associate Professor at MSC Department at CBS. Her research focuses on management learning and higher education, notably at business schools; as well as cross-cultural inquiry. She is interested in learning not only as the transfer of know-how and technical skills but also more broadly as a process of identity formation, acculturation and development of tacit abilities such as intercultural competences, ethical awareness and creativity and innovation.

Sustainable labour market integration: challenges and advancements in algorithmic profiling of jobseekers

By Clément Brébion and Janine Leschke

◦ 5 min read ◦

The number of countries that are using algorithms to profile jobseekers has been on the rise since the 1990s. Algorithmic profiling aims at identifying individuals with little counselling needs, and those for whom intensive counselling and active labour market policies (ALMP) are expected to have the largest returns. The ultimate goal is to target services and thereby expenditures towards the latter. In a dual context of budget constraints and of technological innovations (which makes it possible to build and analyse large register databases), profiling algorithms are increasingly seen as an important vehicle to identify and target those unemployed who are most likely to become long-term unemployed. In an EU-funded project, HECAT – Disruptive Technology Supporting Labour Market Decision Making, we question this consensus. The goal of the project is to go beyond state-of-the-art profiling tools and develop a tool that will allow jobseekers and counsellors to get a snapshot of their labour market situation and a better sense of their labour market options.

State-of-the-art statistical profiling tools carry important shortcomings. One of them relates to the outcome category when used for defining the profiling categories. Most profiling algorithms approach jobseekers’ needs for counselling and for training programs by measuring their likelihood to remain unemployed for more than 6 or sometimes, 12 months. Usually, any type and length of employment spell is counted as a successful exit from unemployment in these models. Research on the causes and consequences of long-term unemployment (LTU) is extensive and we know that an early identification of the jobseekers that are likely to fall into LTU to take action at the earliest stage possible is key.

However, the mere focus on exits towards any type of employment is problematic. On individual grounds first, it disregards the agency of the unemployed by ignoring her lived experience of unemployment and wishes and aspirations for future labour market integration. Second, such a focus on exits without job quality in focus, can also be dysfunctional and inefficient both from the perspective of the individual and the PES as unsustainable labour market integration is likely to lead to vicious circles where people circle between (short-term) employment and unemployment.

In order to address this shortcoming, in deliverable 2.1 of the HECAT project, we discuss the scope for using job quality information in profiling and job matching tools. We develop a list of 24 items covering 7 dimensions that we see important to take into account to meet SDG (sustainable development goal) 8 on decent jobs and economic growth [1]. We do so by drawing on established job quality indices (e.g. here and here).

By putting the quality of jobs in focus, such an approach provides a more complete and sustainable vision of the labour market to the unemployed and the job counsellors and thereby increase their agency.

As we outline in the deliverable there are a number of challenges with this approach. This includes the high complexity of multi-dimensional job quality indices in view of an efficient and usable counselling and visualisation tool as well as a lack of sufficiently detailed job quality indicators on the level of occupations or sectors.

As regards data protection and data privacy, profiling algorithms also carry the risk of being in conflict with the GDPR and the case law of the European Court of Human Rights and the Court of Justice of the European Union. Importantly, these legal bases provide no ready-made ‘checklist’ as to which data can be used, nor which algorithms can be implemented. Impact assessment of algorithmic profiling or job matching tools based on algorithms must therefore take place on a case-by-case basis that takes into account the impact of the algorithm on the citizens. Governments most often disregard the need for these impact analyses and entire profiling algorithm are therefore at risk of being shut down, such as in the Austrian case in 2020.

Impact assessments should first stress the necessity of using privacy-violating profiling algorithms. This can be justified in order to comply with a legal obligation to which the public authority is subject or for the performance of a task carried out in the public interest. The proportionality and fairness of profiling algorithms must also be checked and ensured. Proportionality relates to whether the ends justify the means.

For instance, collecting and analysing data carries a cost, in terms of privacy, which must be compensated by clear gains in accuracy. One should therefore not feed the algorithm with variables that have little explanatory power. Fairness concerns imply that one should ensure that profiling algorithms are not discriminatory. This is not straightforward. Profiling algorithms classify the unemployed based on the typical behaviour observed among other jobseekers with similar characteristics. As a result, individuals from social groups that are traditionally the least attached to the labour market will be profiled as high-risk individual more often than the rest.

While this behaviour of profiling algorithms seems intuitive, research has found that among jobseekers who happen to quickly find a job, those from foreign origin are more likely to be misclassified as high-risk individuals ex-ante than natives.

The fairness condition therefore seems hard to meet for profiling algorithms. Last, profiling algorithms should only use data that is up to date and relevant and, importantly, one should ensure that jobseekers and PES counsellors who use the algorithm have a good understanding of its functioning and limitations. 

Whether or not the use of an algorithm is legal must be continually assessed before, during and after development and implementation. In a working paper based on deliverable 2.2 of the HECAT project, we therefore propose a model for designing algorithms to sum up these considerations. The model is circular in order to illustrate that the assessment should be continually updated.

A proposed model for designing algorithms 
Source: Working paper based on HECAT deliverable 2.2
“Working with not on the unemployed”

Given these shortcomings of state of the art profiling tools, our European project HECAT puts the unemployed persons and their aspirations and needs centre-stage. It aims at building a sustainable digital platform “My Labour Market” which provides both information on the estimated length of time before one exits the unemployment record and a visualisation of labour market opportunities according to one’s job quality preferences. This digital platform, to be piloted at the Public Employment Services in Slovenia, builds on extensive sociological fieldwork on unemployed persons and case workers. This tool will not sort jobseekers into profiling groups associated with specific services and labour market measures. Instead, we believe that well-informed jobseekers will make the best choices for themselves.

[1] The dimensions are: pay and other rewards, intrinsic characteristics of work, terms of employment, health and safety, work-life balance, representation and voice, distance to work.

Further readings

HECAT, deliverables 2.1: https://hecat.eu/wp-content/uploads/2021/11/Deliverable_2_1_final-2.pdf

HECAT, Deliverable 2.2: https://hecat.eu/wp-content/uploads/2021/05/Deliverable-2.2-v.7-RR_final.pdf

About the Authors

Clément Brébion, postdoctoral researcher, received his PhD in economics in November 2019 from the Paris School of Economics. His main research interests are labour economics, economics of education and industrial relations. He has a particular interest into comparative research. More recently, he started working on the EU H2020 project HECAT that aims at developing and piloting an ethical algorithm and platform for use by PES and jobseekers.

Janine Leschke, political scientist, is prof MSO in comparative labour market analysis. Her research interests comprise issues such atypical work, job quality, labour mobility and migration, youth unemployment, as well as gender. She is currently the Danish lead partner in the Horizon 2020 project HECAT, participant in EuSocialCit and one of the editors of Journal of European Social Policy.

Photo by Campaign Creators on Unsplash

Do Tourists Like Nudges?

By Elizabeth Cooper

◦ 4 min read ◦

Nudges have been successfully implemented in various social settings, as a method of guiding people’s decisions in certain directions whilst maintaining their freedom of choice. A number of studies have found high levels of support for nudges across different cultures. However, the context of tourism brings with it some complexities that might make nudging tourists in particular both more challenging and less acceptable.

The “context of tourism” is, of course, not a distinct or objective place or time. Tourism as a practice is in many cases intertwined with the everyday lives of others, so the same nudges that we are exposed to in our local supermarket may also be encountered by a tourist who is visiting our town for the weekend. What defines the tourism context in terms of nudging, therefore, is that the nudge is specifically targeted at people who are on holiday. 

However, existing research suggests that it may be harder to nudge people when they are on holiday than when they are in their everyday contexts, for two main reasons:

  1. We behave differently on holiday than we do at home. We tend to see holidays as an escape from everyday life, and a context in which we deserve to indulge our bad habits without feeling guilty. Complying with a nudge should, by definition, not reduce the consumer’s pleasure – as a result, it is challenging to design acceptable nudges in a hedonistic context like tourism, in which pleasure takes priority. 
  2. We can be less inclined to do things for people we feel different to. While many nudges in our everyday lives are designed to guide us towards choices that are beneficial to ourselves (such as making healthier food choices, or encouraging us to save more of our paycheck), nudges targeted at tourists are often focused on the welfare of groups of people (often host communities) who can feel distant. Existing research in psychology has argued that we are more likely to connect with and feel empathy for others if we perceive similarities between us and them. This can make tourism settings unfavourable for nudging, since many people actively seek to experience difference when they plan a holiday.

Studies on nudging acceptance in general have consistently found that people tend to prefer ‘System 2’ nudges over ‘System 1’ nudges. System 2 nudges are more transparent and require more cognitive effort (for example, providing a hotel guest with information about the environmental impact of their stay). System 1 nudges tend to play on our intuitions and subconscious cognitive processes (for example, including carbon offsetting as a default in a flight purchase, so that customers have to opt out of it rather than in). There are not yet any studies on approval of nudges among tourists, but we can look at which kinds of nudges have been tested on tourists already, and how successful they are.

Some Examples of System 1 Nudges in Tourism
  • Commitment Signalling: In an experiment by Baca-Motes et al. (2012), hotel guests were asked upon check-in to make a commitment to reusing their towels, and then to wear a publicly visible pin indicating this commitment. This increased towel reuse in the hotel by 40%.
  • Providing Feedback: Pereira-Doel et al. (2019) found that inserting an AI display in hotel showers showing the duration of running water during each shower was effective in reducing guests’ water usage.
  • Changing defaults: Kallbekken and Sælen (2013) reduced food waste at a hotel buffet by 20%, simply by making the plates smaller. 
Some Examples of System 2 Nudges in Tourism
  • Increasing pleasure: Some scholars have argued that a hedonic context such as tourism requires more tangible benefits to achieve behaviour change. As a result, a few studies have experimented with nudges that are designed to increase pleasure for the tourist, while simultaneously promoting a desired behaviour. Dolnicar et al. (2019) found it much more effective to offer hotel guests a free drink if they opted out of room cleaning, than to appeal to their pro-environmental values by disclosing information about the environmental impact of room cleaning. Similarly, Dolnicar et al. (2020) managed to reduce plate waste by 34% at a seaside resort, by allowing families to collect stamps every time they did not generate plate waste at dinner. If they collected a stamp for every day of their stay, they could exchange the stamps for a small prize at check-out.

Although these kinds of nudges are ideal for a tourism context, given they increase the pleasure of the tourism experience and are also more likely to be approved of, they require more effort on the part of the tourism business. The tourism sector in many countries is dominated by SMEs, which often lack the resources required to implement nudges like this, even though they want to run a sustainable business. There is certainly a need for further research which works towards developing nudges which a) encourage behaviour that is beneficial for the planet and for host communities, b) are approved of by tourists, and c) are not burdensome for small tourism businesses to implement.

Further reading

Dolnicar, S., 2020. Designing for more environmentally friendly tourism. Annals of Tourism Research.

Juvan, E. and Dolnicar, S., 2014. The attitude–behaviour gap in sustainable tourism. Annals of tourism research.

Reisch, L. A., & Sunstein, C. R. (2016). Do Europeans like nudges?. Judgment and Decision making.

Sunstein, C.R., 2016. Do people like nudges. Admin. L. Rev.

Sunstein, C. R., Reisch, L. A., & Kaiser, M. (2019). Trusting nudges? Lessons from an international survey. Journal of European Public Policy.

Viglia, G. and Dolnicar, S., 2020. A review of experiments in tourism and hospitality. Annals of Tourism Research.

About the Author

Elizabeth Cooper is a PhD Fellow at Copenhagen Business School, within the Department of Management, Society and Communication. Her research aims to link the fields of behavioural science and tourism, by experimenting with strategies to ‘nudge’ cruise tourists into behaving in more sustainable ways, specifically in the ports of Greenland.

Photo by Elizeu Dias on Unsplash

How Should Arctic Drilling Be Defined? The 3 Key Problems with Formulating Investment Exclusions

By Zuzanna Lewandowska and Dr. Kristjan Jespersen

◦ 7 min read ◦

Oil and gas development in the Arctic has long been a subject of controversies, due to the vulnerability and pristineness of the arctic ecosystem, as well as the challenges that the region faces because of climate change. In the light of growing pressure from stakeholders, legislators, and the public, an increasing number of banks, insurers, and investors have been committing to restricting financing of arctic drilling. Typically, this is addressed by formally excluding the funding of oil and gas development in the Arctic from the firm’s investment universe. 

However, several key issues with the current formulations of financial actors’ investment exclusions, make the restrictions potentially ineffective in curbing oil and gas expansion in the Arctic. Firstly, the exclusions typically apply only to financing and coverage, allowing for unrestricted provision of corporate support. Secondly, imprecise financial proxies are used to specify the activity levels at which an exclusion should be applied. For example, exclusions are often based on a revenue threshold, which does not cover early-stage exploration activities that typically do not generate revenue. Lastly, most restriction policies do not refer to a specific definition of the Arctic, which allows for the use of a case-by-case approach when making financing decisions. Where a definition of the Arctic is used, justification is rarely provided for why a specific exclusion zone had been chosen.  

Arctic restriction policies of 10 banks listed among the top supporters of arctic expansionists from 2016 to 2020 (Source: Reclaim Finance, 2021). 
Problem 1: How should the Arctic be defined?

Figure 1 below shows the geographic definitions of the Arctic which arctic restriction policies are most commonly based on. It is evident that they differ significantly in terms of scope. 

Definitions of the Arctic (Source: Nordregio, 2021). 

When choosing which definition of the Arctic to use in their exclusions, financial actors are presented with a difficult choice.

Selecting a wide-reaching exclusion zone, such as the arctic region monitored by the Arctic Monitoring Assessment Programme (AMAP), helps ensure that all assets located in the Arctic are covered. This said, however, such broad exclusions place investors at risk of missing out on profitable investments in ambiguous locations such as the Barents Sea, which has been argued to not be significantly different from the Norwegian sea in terms of oil spill response preparedness or ecosystem vulnerability. This dilemma becomes especially relevant in the context of asset managers’ fiduciary duty. 

At the same time, if the exclusion is based on a definition of the Arctic which is too narrow, the policy is rendered largely ineffective, as it fails to restrict the financing of arctic oil and gas projects which continue to have negative environmental and social impacts. Which definition of the Arctic should be used as basis of a restriction policy, needs to establish based on a nuanced understanding of the geographic distribution of material issues associated with oil and gas development in the area. 

Problem 2: Identifying the negative impacts of arctic drilling

To be able to argue for a targeted exclusion as part of a responsible investment policy, financial actors must credibly prove that the environmental and social impacts of a given activity are particularly dire. Indeed, the discussion is still ongoing as to what extent the documented harmful social and environmental processes in the Arctic can be categorized as by-products of arctic drilling, rather than as cumulative consequences of other activities.  

One of the most common environmental concerns regarding arctic drilling is that it contributes to the melting of the polar ice caps. However, research has found that while black carbon emissions from oil and gas exploration in the Arctic reduce the ice cover’s reflective properties, polar caps are primarily melting due to the increases in global temperatures. As such, one could argue that for an exclusion to significantly tackle the issue of polar ice cap melting, it should extend to investments in all fossil fuel developments worldwide. 

The negative environmental impacts which have been uniquely linked to arctic drilling (e.g., offshore oil spills, black carbon emissions, and biodiversity threats) are notably difficult to capture within a territorial exclusion zone. This is due to the lack of consistent data on their dynamically changing distribution. 

Black carbon emissions in arctic waters in 2015 (Source: ICCT, 2019). 

The issue with addressing the negative social impacts of arctic drilling (e.g., land conflicts, threats to food security) in an exclusion policy, is that similar issues are faced by local and indigenous populations in other vulnerable areas, where oil and gas extraction also takes place, and where investments are not subject to restrictions. Here, a notable example would be the Amazon. 

An additional complication results from the differing perspectives on arctic oil and gas development, with many local stakeholders crediting it with having improved infrastructure and employment opportunities in the region. 

Problem 3: A double materiality perspective – addressing the risks to oil and gas development operations in the Arctic 

From a risk management perspective, a comprehensive investment restriction policy should also account for the unique material risks to profitability of oil and gas projects in the Arctic, which make financing and coverage more volatile. This also falls in line with the double materiality approach to impact assessment. 

The most significant material risks to oil and gas operations which are distinctive to the Arctic are caused by permafrost thawing, sea ice and icebergs, and extreme weather conditions. Similarly to negative environmental impacts, the dynamic nature of these arctic risk factors makes them difficult to capture within a geographic exclusion zone.

The monthly arctic sea ice index for December 2021 (Source: National Snow & Ice Data Center).
What have we learned?

Based on the discussion of the complexities associated with arctic exclusions, it can be concluded that the weakness of key financial actors’ arctic policies is that they deploy ex ante investment restrictions as standalone policy solutions. Arguably, exclusions can be an effective instrument, but only as part of a comprehensive responsible investment strategy, which covers all stages of the investment process and addresses the extensive information needs regarding material issues. 

A well-formulated exclusion can help streamline the pre-investment negative screening process by filtering out investments which:

  1. Have been proven to be associated with unique material risks and negative impacts,
  2. Can be identified with high precision, accounting for the dynamic changes and complexities in the underlying material issues.  

Those of the material risks and impacts which cannot be captured in an exclusion policy should be addressed using other pre-investment (positive and negative screening, information requests and questionnaires) and post-investment (active ownership and thematic engagements) measures.

Such a nuanced approach to policy exclusions could provide a powerful responsible investment tool for financial actors in areas and sectors which require additional due diligence. 

About the Authors

Zuzanna Lewandowska is a student researcher in ESG and Sustainable Investments at Copenhagen Business School. She studies responsible investment strategies and the state of the art of measuring and reporting information on ESG factors. She has a background in international business and strategy, global market intelligence, and policy consulting.

Kristjan Jespersen is an Associate Professor at the Copenhagen Business School. He studies on the growing development and management of Ecosystem Services in developing countries. Within the field, Kristjan focuses his attention on the institutional legitimacy of such initiatives and the overall compensation tools used to ensure compliance.

Photo by Annie Spratt on Unsplash

Lobbying as if it mattered

By Dieter Zinnbauer

◦ 6 min read ◦

The corporate political activities of a business – let’s call them “lobbying” as a shorthand, although they comprise much more from public relations to political spending to sponsorship of thinktanks etc – have long played a rather minor role in discussions on corporate responsibilities. 

And this relative insignificance also converted into rather minimalist expectations about what responsible lobbying should look like: stay within the bounds of the law (i.e. in some jurisdictions, file some lobbying reports and do not hand out bribes); don’t lie egregiously, although puffery and other tricks of the trade are acceptable; and as some scholars in business ethics would cautiously add: don’t do anything that excludes others from contributing to the democratic discourse in an informed manner. 

In many ways this anodyne conception of responsible lobbying mirrors the equally thin conception of corporate responsibilities under the old shareholder-first-and-only paradigm that started and stopped with making profit bounded by legal compliance as the primary responsibility for business.

A growing mismatch

Such a close alignment is hardly surprising.  Yet while the broader expectations for corporate responsibility have substantively evolved and expanded since then, no such trajectory can be discerned for corporate political responsibilities. The former moved from negative responsibilities of don’t be evil to a growing set of capacious positive obligations of how companies ought to treat their various stakeholders and the environment. The latter – expectations for what constitutes responsible lobbying – appeared to largely remain stuck with this minimalist canon of obligations outlined above. True there have been some improvement at the margins, more reporting on political spending and lobbying and more ad-hoc pressure for taking sides on a small segment of social issues in some jurisdictions.  

But despite the best efforts of a small, dedicated band of good governance advocates the scope and urgency of public expectations on what responsible lobbying should look like have not budged much and certainly have not grown in line with broader corporate responsibilities. 

Enter the climate emergency

But things have changed dramatically over the last few years. Responsible lobbying is receiving much more attention in the policy debate and in academia and it is increasingly associated with a set of positive corporate obligations and much more stringent boundaries for which tactics are considered illegitimate. As I would argue, there is one principal engine that drives these much higher expectations for what responsible lobbying should entail: the climate crisis, the civilisational challenge to decarbonise the world economy and several dynamics that it has unleashed in the policy arena.

There is a growing recognition, for example, that what companies do in climate politics is at least as important and often more important than what  they do operationally to reduce their own carbon footprint. Then there is the emergence of a rapidly expanding climate governance and corporate accountability ecosystem whose tracking capabilities, incentive levers and accountability mechanisms dwarf anything that is available for governing lobbying in politics more conventionally. Unfortunately, there is not enough space here to elaborate on these and other such drivers. 

From projecting future aspirations to back-casting for present obligations

For the remainder of this blog I would like to suggest and focus on another, perhaps less obvious and more difficult to grasp contributing dynamic: a shifting normative corridor of what is considered responsible lobbying driven by the particular nature of the climate challenge. The argument goes like this:

Ever more precise climate science and the Paris Agreement to do what is necessary to reduce global heating to a 1.5 to 2 degrees rise to at least avert the most catastrophic scenarios provide a clearly defined, time-bound landing zone for policy action. The days of outright climate change denial are thus over. Seeding doubt about the facts of climate change or the decarbonisation goal has thus terminally shifted out of the Overton window of what constitutes acceptable viewpoints and (barely) tolerable public relations messaging. But more interestingly, things have not stopped here. The civilisational urgency of getting to net zero by 2050 leaves only a few years and a very narrow and rapidly narrowing corridor of necessary action options.

To oversimplify just a bit: responding to the climate crisis is by now more of an exercise of back-casting, deriving the necessary public and corporate policy action from what must be achieved, rather than an open-ended experimentation space guided by a rough compass for direction of travel.

We are by now so short of time and so clear-sighted about the science that we basically know what fossil assets must stay in the ground, what infrastructures need to be blitz-scaled etc. This clarity of goal and techno-economic pathway also means that most not-so-good-faith lobbying tactics aimed to stall, distract, or opportunistically suggest some costly detours are much easier to spot and call out – than would be the case if the option space was still more open.  The normal-times policy deliberation on what business could be imagined doing to help us move towards a desirable future has morphed into a policy imperative for what business must and must not do by when to help achieve net zero by 2050.[1]

Attesting to these dynamics, for example are the emergence of reporting frameworks, assessment exercises, shareholder action and CEO commitments that judge or design a company’s lobbying efforts against scientifically derived necessary policy actions for decarbonizing by 2050. But perhaps even more emblematic for the rising expectations for responsible lobbying is the action plan that one of the leading global PR agencies working for fossil fuel interests has been forced to put forward very recently amidst intense public pressure, including from its own employees. Here some excerpts:

  • Put science and facts first. We seek a better-informed public on climate issues so that we enable swift and equitable action. We will ONLY be led by the science and base our work on objective, factual and substantiated data.
  • We will establish and publicize science and values-based criteria for engagement with clients. This goes farther than our principle of not accepting work from those who aim to deny climate change. We will not take on any work that maintains the status quo, or is focused on delaying progress towards a net-zero carbon future. We will support companies that are committed to the Paris Agreement and transparent in reporting their progress in accelerating their transition to net-zero emissions. 
  • Hold ourselves accountable. We hold ourselves and our clients accountable to continual progress, with transparency on results through regular reporting.

A PR maestro engaging in PR spin for managing its own PR crisis? Perhaps. But there are enough concrete actions included that makes it worthwhile to track this and hold the company up to its commitments.  

And such a forced response by a world-leading PR company clearly demonstrates that expectations for responsible lobbying against the backdrop of the climate crisis, have rapidly matured from compliance and do no outright evil to a concrete set of positive obligations against which political footprint of companies and their service providers can be evaluated.

The ingenuity required to get us to net-zero is 20% technical and 80% political of how to incentivize, mobilize for and administer a just, legitimate transition. 

This outmost importance of climate politics and policy-making combined with the outsize role that businesses and their associations play in this space as the best-resourced and most influential interest group, clearly highlight that responsible lobbying as a set of substantive, positive obligations is an essential piece of the puzzle in solving this civilisational challenge. And my bet is that things will not stop here: higher expectations for responsible lobbying on climate issues are likely to lift all boats over time and translate into higher expectations for how business ought to behave in the political sphere more broadly. 

[1] There remain of course a number of important unresolved policy choices with regard to carbon capture, geo-engineering, bridging fuels etc. but the overall option space and available policy pathways are by now much narrower than two decades ago or relative to many other big policy challenges.

About the Author

Dieter Zinnbauer is a Marie-Skłodowska-Curie Fellow at CBS’ Department of Management, Society and Communication. His CBS research focuses on business as political actor in the context of big data, populism and “corporate purpose fatigue”.

Photo by Tania Malréchauffé on Unsplash

Are sustainable and healthy diets always compatible? Needs for an emic-oriented cultural research on sustainable consumption

By Fumiko Kano Glückstad

◦ 6 min read ◦

It is widely acknowledged that a plant-based diet is healthier than an animal-based diet (Willett, et al. 2019). However, a group of Japanese researchers recently published a thought-provoking article demonstrating that a lower diet-related Greenhouse gas emission (GHGE) has generally resulted in an inadequate nutrient intake among Japanese adults (Sugimoto et al. 2020).

Their results seem to support the fact that the Japanese Government has excluded any dietary-related initiatives from its long-term national strategies concerning the targeted 80% reduction of greenhouse gas emissions by 2050. In other words, Japanese opinion leaders seem to challenge the generally accepted viewpoint of a direct positive correlation between a sustainable diet and a healthy diet, contradicting widely accepted European studies and initiatives (e.g. Sjörs et al. 2017). This apparent controversial observation motivated me to look into the historical development of meat consumption on a global scale. Most importantly, the recently published guiding principles by the Food and Agriculture Organization of the United Nations (FAO) and World Health Organization (WHO) in 2019 state that “Sustainable Healthy Diets” are a trade-off between the two dimensions: sustainability and healthiness of diets. Thus, countries should decide on such trade-offs in consideration with their situation and goals (FAO & WHO, 2019). 

The following figure indicates such a trade-off situation for various geographical regions and it clearly shows that the meat consumption in Western countries is obviously higher than the rest of the world such as compared to e.g., Africa or Asia, although a substantial increase of meat consumption is observed in both China and Japan.

In particular, the main increases observed in China and Japan seem to be well-synchronized with the periods of their respective economic developments that simultaneously triggered their modernization (Westernization) process in their markets. However, the curves of Japanese and Chinese meat consumption also show a noticeable difference. Whereas the meat consumption in China has steeply increased since the 1980es, Japan seems to moderate its increase from the early 1990es and ahead, which is most likely explained by their respective economic developments. However, in this blog, I want to supplement these observations with some personal insights on what has happened in Japan during this period through my work experiences in the related industry.

Meat consumption in this blog refers to the average supply of meat across the population shown in this figure. Food supply is defined as food accessible for human consumption meaning the food remaining for human use after deduction of all non-food utilizations. Source: Our World in Data https://ourworldindata.org/grapher/meat-supply-per-person

During the Japanese bubble economy in the 1980es to the early 1990es, the Japanese middle class had increasingly wider opportunities to be exposed to the Western food culture due to their Westernization. This somewhat alarmed key Japanese health professionals, nutritionists, food experts and industries who considered a ”Western lifestyle and food culture” as a source of lifestyle-related chronic diseases e.g., diabetes 2 and cardiovascular issues, which would gradually impact Japanese consumers.

This subsequently triggered a countless number of initiatives aimed to nudge a wide range of the population towards a healthier diet. The initiatives were eventually formalized as a Health Promotion Act in 2002 and the Basic Law on “Shokuiku (food and nutrition education)” in 2005 by the Japanese government (MAFF, 2019).

Source: Ministry of Agriculture Forestry and Fisheries. 2019. “A Guide to Shokuiku.” https://www.maff.go.jp/j/syokuiku/guide/pdf/00_en_guide.pdf

The Shokuiku act has since become a comprehensive program targeting everyone from school children to the elderly, and its initiatives have involved a broad range of Japanese stakeholders, not only the central and local governments, health professionals and nutritionists but also food and restaurant businesses and their consumers.

The Shokuiku program has promoted the nutritional education from a holistic viewpoint and emphasized the importance of enjoying healthy meals from societal and cultural perspectives through various sensory food experiences. As a consumer researcher in the 1990es in one of Japan’s largest high-tech companies producing various kitchen appliances, I also personally participated in a variety of initiatives involving consumer organizations, health professionals, nutritionists and food and restaurant businesses to nudge consumers towards a healthy diet at that time. 

In a European context, nudging consumers towards a sustainable and healthy diet usually implies the replacement of an animal-based diet with a plant-based diet with emphasis on ingredients. One major difference to the Japanese nudging initiatives is that the Shokuiku promotion has encouraged consumers to learn how to select “nutritionally balanced meals” in their daily life while enjoying variations in sensory food experiences. Consumers have many ways to achieve this by following the “Japanese food guide spinning top” that can be easily followed by a wide range of population groups, i.e. from school children to the elderly (see the below picture). The maintenance of a moderate meat consumption level observed from the Japanese curve in the above figure might be partially attributed to such ‘enjoyable’ Shokuiku initiatives (see Yoneda, 2019).

Japan has been able to moderate its overall meat consumption without specific promotions of plant-based diets also thanks to the traditional Japanese food culture that is originally rooted in a plant-rich diet. Thus, in a Japanese context, it is perceived possible to achieve a well-balanced diet while simultaneously enjoying variations in sensory food experiences, in other words, nudging a healthy diet can be perceived as an enjoyable experience. Interestingly, Kanemoto et al. (2019) recently reported that meat consumption only weakly explains the difference between high- and low food carbon footprints (FCF) among 60,000 Japanese households. This study ponders that Japanese should (also) consider restricting their consumption in other areas than meat consumption with a higher estimated FCF such as restaurant foods, confectionary and alcohol. 

Source: Ministry of Agriculture Forestry and Fisheries. 2019. “A Guide to Shokuiku.” https://www.maff.go.jp/j/syokuiku/guide/pdf/00_en_guide.pdf

These observed trends indicate the importance of fully understanding social, cultural and dietary contexts in various countries and regions when researching on sustainable food consumption because food is inherently deeply rooted in the specific cultures. In other words, sustainable consumption studies should ideally shed more light on an emic approach addressing a specific sample of that region and discuss adaptability of such studies to countries outside of the specific region with due respect of the embedded cultural contexts. 

About the Author:

Fumiko Kano Glückstad is Associate Professor of Cross-Cultural Cognition at the Copenhagen Business School. She works in the area of cross-cultural psychology and her recent project “iBeauty” funded by the third largest Japanese cosmetic company investigates associations between personal values, beauty and well-being in cross-cultural contexts. She previously worked as a consumer researcher and product concept designer of kitchen appliances at Panasonic Corporation, one of the largest Japanese electronics industry enterprises.

Negative Capability: Sustaining our discomfort towards a collectively responsible society

By Tali Padan

◦ 3 min read ◦

In my PhD studies, I work with a different type of sustainability. Not the sustainability of carbon footprints or systemic transformations but a sustainability of reflection. How we do keep ourselves in continuous reflexive dialogue (with ourselves and others) so that we don’t prematurely reach conceptual closure, stagnating in our own comfort?  

Maybe comfort is sustainability’s biggest threat. 

I say this considering the many years I’ve lived in the US, after a few formative years in Israel. Comfort is the reason my mom uses paper towels in lieu of regular towels in the kitchen, and the reason my dad cannot stand critics of Israel. Comfort is identity. It is plastic. It is the reason I throw away the whole moldy cream cheese instead of washing and separating. It is why it is easier not to participate in big group meetings. This blog post itself is a distraction from the discomfort that Chapter 5 of my PhD dissertation brings. 

When this comfort is shaken up, there are many ways of trying to get there again – avoiding, rejecting, resisting – and in the case of global shakeups like the Covid pandemic, the talk about ‘getting back to normal’. But what if we were able to maintain a state of uncertainty, of not knowing what the solution is or how to get there. And rather than spending energy trying, we settle into the unsettlement, letting it stir up the hurricane of trapped emotions and meeting visitors we thought we buried years ago? This is what the poet John Keats called ‘negative capability’, the ability to be in uncertainties, mysteries and doubts ‘without any irritable reaching after fact & reason’.

 What if that ‘irritable reaching’ was in reality counterproductive towards our individual and therefore collective growth? 

Here comes the ‘don’t get me wrong’ section. I am not suggesting we linger in the dissonance until the glaciers drown us. Nor that we use this approach as an excuse not to try, or ironically – get so comfortable with the discomfort that we disengage from any responsibility. But that we let each shake-up sufficiently run its course so that our demons can be faced, both individually and collectively.  

In the elective course that I teach for third year Bachelor’s students, this is what we practice. First, and maybe most importantly, we sit in a circle. The circle grounds us in our fundamental equality and triggers us to explore our many inequalities. The class engages in a series of activities dealing with democracy, using an Israeli democracy education method called ‘Betzavta’ (Hebrew for ‘togetherness’). Betzavta, developed in the Adam Institute in Israel, integrates and emphasizes dilemmas and conflicts in order to experientially learn how to live with others in a democratic society. Each activity in the method includes reflecting on the result of the activity but also on the process. By shifting the reflection towards process, students are provoked to examine their own dynamics. Subconscious assumptions and habits can then be revealed and questioned.  

It is by no means an easy process. As one student succinctly put it in the final evaluation: 

“I thought that the whole thing was very good, good questions, good topics, good dialogue. But man, did it suck. It was horrible actually. But very cool.” 

The ‘horrible’ part that this student is referring to could range from the discomfort of conflicting opinions to the tension of judgement, and the palpable, heavy silence that can be felt when students hold back from sharing these tensions. The good part, as I perceive it from the facilitator’s chair, is that these tensions are exposed, felt and explored, and subsequently used towards a reflexive type of learning. Lingering in these tensions cultivates our negative capability and is the doorway towards this learning. 

The class represents a miniature society. When going through such an experience, students start to naturally move away from an exaggerated individuality and become more considerate towards the collective. By exposing and sharing the more difficult emotions we usually avoid – anger, irritation, overwhelm, anxiety, boredom – students get the opportunity to practice living together more genuinely, modeling the society most of us wish to see in the world. Lingering in these emotions requires being negatively capable because the habit is to seek comfort, stability, a pleasant state of mind. In this way, the ‘negative’ in negative capability does not refer to what is undesirable but rather an absence, the absence of habit, identity, or ideology. It means having the ability to stay in uncertainty without resorting to previous knowledge structures or beliefs. It’s in the letting go, entering the vulnerable home of the unknown, where thought is not there to fragment and give birth to anxiety, that we may connect with each other more genuinely. This, in my view, is a sustainable practice that could benefit us individually and therefore collectively. 

About the Author

Tali Padan is currently in the final year of her PhD at CBS, writing about experiential learning techniques in the business classroom. As a facilitator and researcher, Tali is interested in how purposeful experiences of dissonance can contribute to learning. She is from Israel/USA and has lived in Denmark for ten years. 

To stay or to go: Corporate complicity in human rights abuses after the coup d’état in Myanmar

By Verena Girschik & Htwe Htwe Thein

◦ 2 min read ◦

Foreign investors in Myanmar have come under increasingly intense pressure to cut ties with the Myanmar military since the military coup on 1st February 2021. Immediately after the coup, Japan’s Kirin Beer announced its decision to cut ties with its joint venture partner MEHL, i.e. the commercial arm of the military. However, fellow investors did not immediately follow Kirin’s withdrawal. Instead, they appeared to be treading water to rid out the storm. 

Myanmar had been undergoing democratic transition since 2011, promising developments and luring investors’ interests as the last frontier of the Southeast Asian market. Indeed, the democratic transition had pathed the way for economic and developmental achievements, attracted investments in several sectors such as garment manufacturing. Yet then the military took back power, among others to secure its economic interests.

Governments and civil society in their home countries have been calling on companies to act responsible and not to do business with the military. 

The pressure on companies who had been sourcing from Myanmar, including popular fashion brands like H&M and Bestseller, has been mounting. H&M and Bestseller did respond to the call and did suspend their orders from Myanmar before deciding to resume orders in May. Several foreign investors have withdrawn as the military’s attack on the civilians intensified and the international community stepped up their sanctions regime. The latest step was the refusal of the ASEAN not to invite the military leader Senior General Min Aung Hlaing to the summit in October 2021. 

But is leaving the country really “the right thing to do”?

Companies who stay support the military in one way or another, for example by paying taxes directly to the military or paying rent or other fees to one of the military conglomerates (MEHL). Such payments from corporate investors provide a financial lifeline to the continuation of the military rule, hence, funding is a very important aspect of this dilemma for foreign investors and policy makers alike. The governments of the U.S., UK, Canada, the European Union have imposed sanctions targeting military interests. However, those sanctions so far have fallen short of targeting it where it would really hurt the military, in particular in the oil and gas sector that provides a lot of revenue. To weaken the military’s financial lifeline, the shadow government and activists have been calling for companies to stop all kinds of payments to the military. Inside the country, boycotts of military intestates have intensified. For instance, householders have been participating in an electricity bill boycott, thus using the withdrawal of this kind of support as a form of resistance. Not surprisingly, many companies have by now decided to pull out. 

Yet while leaving the country ceases support to the military, it also entails that companies no longer provide goods and services (including essential services) and support to the workers and civil society (e.g. Telenor;  Germany’s food retailer Metro. Companies have been supporting workers by sustaining safe workplaces, thereby securing workers’ incomes and stability.  What is more, their support has enabled and sustained social movements. For example, women union leaders in the garment industry have been a driving force in anti-military protests. 

Given the severity of human rights violations by the military, companies ought not to continue business as usual. Only by leaving can they cut all ties with the military and avert their complicity in atrocious human rights abuses. But by leaving, they also cease support to their most vulnerable stakeholders. The impact on the social contributions (via CSR) and Myanmar civil society, especially their workers, might be devastating. 

About the Authors

Verena Girschik is Assistant Professor of CSR, Communication, and Organization at Copenhagen Business School (Denmark). She adopts a communicative institutionalist perspective to understand how companies negotiate their roles and responsibilities, how they perform them, and with what consequences. Empirically, she is interested in activism in and around multinational companies and in business–humanitarian collaboration. Her research has been published in the Journal of Management Studies, Human Relations, Business & Society, and Critical Perspectives on International Business. She’s on Twitter: @verenacph

Htwe Htwe Thein is an Associate Professor in International Business at Curtin University, Australia. She is internationally known for her work on business and foreign investment in Myanmar and has published in leading journals including Journal of World Business, Journal of Industrial Relations, Journal of Contemporary Asia, International Journal of Cross-Cultural Management and Feminist Economics (and international publishers such as Cambridge University Press, Routledge and Sage). She is also well-known as a commentator in media and press on the Myanmar economy and developments since the military takeover on 1 February 2021.

“A Little Less Unsustainable Is Not the Same as Sustainable” – Why Including Fossil Gas and Nuclear Power Will Harm the EU Taxonomy

By Andreas Rasche 

◦ 3 min read ◦

The EU Taxonomy reflects a classification system that assesses whether certain economic activities are environmentally sustainable. Without doubt, the idea is a good one and the Taxonomy acts as a prerequisite for the EU’s Corporate Sustainability Reporting Directive (CSRD) and the Sustainable Finance Disclosure Regulation (SFDR) to unfold their full potential. But: should fossil gas and nuclear power be included into the Taxonomy and hence count as environmentally sustainable? A leaked EU “non-paper” seems to suggest exactly that… 

Including fossil gas and nuclear power will significantly harm the Taxonomy, both in terms of its perceived legitimacy but also in terms of its consistency with existing policy frameworks and regulations. I believe that there are three key points to consider: 

  1. Legal Inconsistency: Including fossil gas and nuclear power into the Taxonomy is likely to undercut the very regulation that the Taxonomy is based on. Article 10 of the Taxonomy Regulation (EU 2020/852) makes clear that an economic activity is considered sustainable if “that activity contributes substantially to the stabilisation of greenhouse gas concentrations in the atmosphere” (my emphasis); at least for fossil gas this is highly questionable. Although nuclear power is a low-carbon energy source, it is by no standards a safe alternative to renewables. In fact, it is a risky energy source, especially if we consider its entire life cycle. This is exactly why many investors see nuclear power as an exclusion criterion for sustainable finance products. When considering the entire life cycle of nuclear power, this energy source creates non-calculable risks vis-à-vis the Taxonomy’s environmental objectives (e.g., the protection of healthy ecosystems). For instance, the mining and processing of uranium has a questionable sustainability track record. 
  2. Policy Inconsistency: The EU itself suggested that to reach its goal to reduce emissions by 55% until 2030, there is need to cut 30% of the total consumption of fossil gas by 2030. However, including fossil gas into the Taxonomy will re-orient capital flows in a way that money is flowing into this sector (and not away from it). At the end, it is likely that this will lead to higher usage of fossil gas, much beyond the “transitional use” that the EU intends to establish. Further, a number of EU member states have pledged during COP26 to show “public support towards the clean energy transition and out of unabated fossil fuels.” This pledge does not seem well aligned with an inclusion of fossil gas into the Taxonomy. 
  3. Reduced Perceived Legitimacy: A factor that is less debated in the public, but still very relevant, is the reduced legitimacy of the Taxonomy. Although the Taxonomy, and linked regulations like SFDR, imply more work and a certain “bureaucratic burden” for financial market participants, many market actors have welcomed the new regulations. They increase transparency, make greenwashing harder, and hence have the power to re-orient capital flows into sustainable economic activities. Including fossil gas and nuclear power into the Taxonomy, endangers this legitimacy. In fact, the Taxonomy may move “from hall of fame to wall of shame”, as the WWF recently suggested. 

At the heart of the problem, lies a misunderstanding, I think. The EU Taxonomy is supposed to single out those economic activities that have the potential to make a substantial contribution to reaching six environmental objectives. Just because an economic activity is a little less unsustainable than comparable activities, it is not ipso facto sustainable. Being less unsustainable is different from being sustainable. Put differently, just because nuclear may be “cleaner” than coal does not imply that the former contributes to sustainability. 

It is often argued that fossil gas and nuclear power need to be included into the Taxonomy as they are necessary “transitional activities”. I believe this claim is misleading: 

  • Focusing on “transitional activities” sets the bar very low for Europe’s ambitions Green Deal. Ursula von der Leyen called the Green Deal Europe’s “Man on the Moon” moment, pointing to its ambitious character. If contested energy sources like fossil gas and nuclear power become part of the Taxonomy, we have not put a man on the moon. Maybe, then, we have not even managed to let the rocket start… 
  • Excluding fossil gas and nuclear from the Taxonomy does not imply that these energy sources will vanish overnight. It simply means that they will not be considered a sustainable economic activity (like a number of other economic activities). 

It is time to take the Taxonomy seriously, otherwise we may slow down or even hinder the necessary green transition of Europe’s economy…

About the Author

Andreas Rasche is Professor of Business in Society and Associate Dean for the Full-Time MBA Program at Copenhagen Business School. More at: www.arasche.com. 

Photo by Frédéric Paulussen on Unsplash

Moving towards mandatory CSR – EU’s mandatory Human Rights Due Diligence proposal

By Johanna Jarvela

◦ 2 min read ◦

Last March European parliament gave a proposal to create mandatory Human Rights Due Diligence directive. The aim is to prevent human rights and environmental harm in a more efficient way, through regulation. The commission proposal is based on the UN Guiding Principles on Business and Human Rights and has three core elements: firstly, companies should themselves assess the risks of human rights violations in their supply chains, secondly, take action together with the stakeholders to address identified threats, and lastly – and most importantly – offer a system for access to remedy for those whose rights have been violated.  The commission is expected to give their resolution on the matter before Christmas, though the decision has been delayed already few times.

The EU proposal can be seen as a part of a continuum towards more mandated forms of corporate social responsibility (CSR). Traditionally CSR has been defined as something voluntary that companies do in addition to the letter of law in response to stakeholder pressures and societal expectations. At the level of individual organisations this has meant providing societal good through philanthropy and partnerships with NGOs or avoiding harm by improving the sustainability of business operations. Also, a great number industry level voluntary standards have been invented to solve the environmental and labour issues in transnational supply chains (Fair trade and Forest Stewardship Council being good examples). 

However, the past 20 years of voluntary measures have not been able to eliminate human rights violations in business operations. Indeed, it seems that voluntariness works for inspiring collaboration and innovating for better world.

In situations of wrongdoing, exploitation, and harm, stronger frameworks are needed to hold organizations accountable and offer remedy to victims. 

The recent development towards more mandated forms of corporate responsibility, like the French Due Diligence reporting Act or the UK Modern Slavery act, can be seen as efforts to respond to the accountability deficit. In June this year Germany passed a HRDD law stipulating that companies must identify risks of human rights violations in their supply chains and also take countermeasures. Also, Norway passed a similar law that requires companies to conduct human rights and decent work due diligence. Similar issues have been discussed in most of European governments.

There are caveats in creating this type of regulation. It might lead to tick-the-box type of exercises without true consideration for the human rights risk, burden companies if not given enough time and guidance to adjust, and transparency reporting does not seem to be enough to change business behaviour. One of the most difficult, yet most important, area in developing the new binding standards is the pillar three of UNGP: Access to Remedy. This pillar tries to ensure that in cases of violations, the victims will have a channel to make claims and receive remedy. Whether it should be civil or administrative liability or whether there should be an ombudsman in each country receiving complaints or via whistleblowing is all still in the air. What is clear is that whatever the final design of well-functioning HRDD system requires inputs and cooperation from businesses, civil society, and governments alike. Companies know best their supply chains, but sometimes NGOs may be a useful counterpart for identifying the risks and setting up stakeholder consultations. Finally, governments should be final proofers of the system ensuring accountability and enforcement. 

While some industry associations have raised concerns about the new regulations and the ability of European companies to oversee operations elsewhere, companies also evaluate that the new EU directive might level the playing field and give them a new tool in managing supply chains. Indeed, it seems that we are moving towards regulated CSR not only within EU but globally. UN has launched an intergovernmental working group to prepare a binding treaty on Business and Human Rights, there is an initiative for  minimum global corporate tax and efforts to close tax havens. More and more reporting is expected by companies, not only as increasing ESG reports to shareholders but more and more also as part of the mandatory legal requirements. 

Societal expectations are one of the key drivers for CSR. According to the latest polls it seems that European citizens and consumers expect the companies to upkeep good human rights and environmental standards within their global supply chains. 

About the Author

Johanna Järvelä,  is a postdoc researcher at Copenhagen Business School and member of the advisory committee for Human Rights Due Diligence Law in Finland. Her research focuses on the interplay of public and private governance in natural resource extraction and she’s especially interested in exploring how steer private sector towards providing societal good. 

Photo by Lan Nguyen on Unsplash

Sustainable brands on Black Friday: What do consumers perceive as authentic?

By Nina Böntgen, Sara Derse and Meike Janssen

◦ 4 min read ◦

The fashion industry has repeatedly come under fire for its negative effects on the environment. With heightened attention towards the climate crisis and scandals highlighting the industry’s social shortcomings (Rana Plaza, 2013), more and more ‘native’ sustainable fashion brands have emerged. However, parallel, we witness a trend towards ever-increasing consumerism. Frequently, Black Friday is seen as the epitome of consumerism which raises the question: How do sustainable fashion brands approach the biggest shopping day of the year – Black Friday – and how do consumers perceive these campaigns?

We reviewed Black Friday Instagram posts by self-claimed sustainable fashion labels and found they can be conceptualized along two axes: (1) the level to which consumption is encouraged / discouraged, and (2) the degree of action taken by a brand to express its commitment to sustainability. This conceptualization accounts for existing societal marketing strategies, particularly Demarketing, Green Marketing, and Cause-related Marketing. On the one hand, the brand Raeburn closes its shops and urges consumers to use Black Friday to repair their clothing rather than buying new items (Demarketing). On the other hand, the brand People Tree promotes 30% off everything claiming that consumers should “add some green to [their] wardrobe” (Green Marketing). 

Business-as-usual, a revolution, or planet-saving purchases – what is actually authentic?

By interviewing 20 consumers, we found that they judge authenticity by inspecting various cues that are leveraged to identify authenticity drivers. For example, donating to WWF (Cause-related Marketing) yielded legitimacy for TwoThirds’ Black Friday campaign. Authenticity is a complex concept – it is multidimensional, subjective, dynamic and socially constructed. Multidimensionality implies that one cannot answer “what is authentic?” precisely; it is an interplay of different attributes. In our case, respondents described an advertisement as authentic when it was credible, relatable, congruent, original and/or impactful. Next, subjectivity means that what is authentic for one person is not necessarily authentic for another. Influential consumer characteristics are a person’s general scepticism towards advertising, level of environmental concern, and understanding of sustainability, resp. do we simply need less- or better/greener consumption to mitigate climate change?

“and it’s kind of a contradiction: ‘Please shop to help the planet’ and I think you can’t shop and help the planet at the same time. So less or no consumption is at all times the best option” (Consumer 1)

“you’re using capitalism to make the world a little bit better. And I think in my eyes, that’s a good strategy to go for” (Consumer 2)

Third, authenticity perceptions can change over time, for example upon new information. Last, authenticity does not exist as a stand-alone concept but is always sensitive to societal changes.

What does this imply for marketers of sustainable brands?

Black Friday is a dynamic context in which brands have to actively reflect on their communication strategy and respective consumer authenticity perceptions. Consequently, no communication strategy shows clear advantages or can be labeled ‘most authentic’. We advise brands to reflect on: 

  1. Their standpoint regarding Black Friday
  2. The needs of their target group
  3. The statement they want to make on Black Friday
  4. The tone they want to adopt in their campaign

Sustainable brands increasingly embrace creative ways to distance themselves from the traditional Black Friday, e.g. by closing shops, ‘selling rubbish’ or even raising prices. It remains unclear, however, whether these forms of brand activism reflect a brand’s honest opinion or are employed as a tool to stand out.

We also observe brands who are holding their customers responsible: on Black Friday 2020, Armed Angels let buyers choose between a higher discount or rainforest protection. After Black Friday, the brand revealed that the majority of their customers had chosen the higher discount, which raises the question: 

Can consumers be held responsible for making more mindful purchase decisions or is increased action by companies and governments needed? 

Upon stating its disappointment about the outcome, followers accused the brand of shaming their customers for choosing higher discounts. This translates to another relevant consideration for sustainable fashion labels – choosing the right tone. While radical messaging conveys urgency and appeals to environmentally concerned consumers, others feel opposed to it and, instead, want to be involved in dialogues. Again, this shows that when it comes to Black Friday, there is no ‘one size fits all’ solution – rather, brands should take time to think about their values and how they can make a meaningful difference on Black Friday 2021.

Throughout the interviews in our study, multiple consumers shared with us how they were inspired by campaigns of sustainable brands and respectively questioned their purchase decisions. This demonstrates that sustainable brands’ communications can actually exceed Black Friday and have lasting effects – not only on their brands’ perceived authenticity but also on our planet’s future.

About the Authors

Nina Böntgen is a recent graduate from MSc Brand and Communications Management program at Copenhagen Business School. Next to her studies, she was actively engaged as team lead and board member of oikos Copenhagen, a student initiative driving change towards greater sustainability. She’s happy to share further insights or engage in discussions on the post or the broader thesis (how sustainable brands navigate authenticity and greenwashing) via email (n.boentgen@web.de) or Linkedin.

Sara Derse is a recent graduate of the Msc Brand and Communications Management program at Copenhagen Business School. Fascinated by the topics of consumer psychology and purpose branding, she was involved in the sustainability-focused student initiative oikos as a Project Manager. She is happy to discuss her thesis (consumer perceptions of fashion brands with a purpose centred around sustainability) in further detail via email (saraderse@live.de) or Linkedin. 

Meike Janssen is Associate Professor for Sustainable Consumption and Behavioural Studies, CBS Sustainability, Copenhagen Business School. Her research focuses on consumer behaviour in the field of sustainable consumption, in particular on consumers’ decision-making processes related to sustainable products and the drivers of and barriers to sustainable product choices.

Photo by Ashkan Forouzani on Unsplash

Climate Change and Magical Thinking

By Steen Vallentin

◦ 7 min read ◦

COP26, the 26th UN Climate Change Conference, has just ended. It was supposed to be ‘the next big and significant one’: the great follow-up to COP21 five years ago, the outcome of which was the Paris Climate Agreement, the first binding international treaty on climate change. The global urgency regarding climate issues has certainly never been greater. 

Although COP26 has yielded some results and some progress has been made, it has been a disappointment to many, including the iconic and omnipresent Greta Thunberg, who was filmed chanting “you can shove your climate crisis up your a…” along with other demonstrators at a rally in Glasgow – and who summarized the accomplishments of COP26 in three words:

Blah blah blah.    

Looking at the Glasgow Climate Pact and its immediate reception, we are certainly, once again, witnessing a political willingness to attribute considerable significance to (non-binding) declarations of intent regarding (possible) future actions and to the mere mentioning of the 1,5°C temperature increase target and efforts to phase-down (not phase-out) the use of coal power and fossil fuel subsidies.    

In the absence of truly transformational commitments and progress, the espoused political belief in the power of words to move action can seem quite magical at times, indeed reflective of magical thinking. Certainly, there was nothing magical about the moderate public and civil society expectations of progress preceding COP26. We have to look elsewhere for the magic. We have to look inside the established political system, where magical thinking is at play in definitions of climate problems and solutions, and where it, in itself, constitutes a problem worth addressing.

What is Magical Thinking?

To begin with a definition, magical thinking refers to “the idea that you can influence the outcome of specific events by doing something that has no bearing on the circumstances”. It is a well-known phenomenon in the area of human health and disease. Children are known to practice it. 

However, in the area of climate change and sustainability it is the grownups, in particular politicians, that tend to have a proclivity for magic – with the younger generation seeking to expose the deficiency and unrealness of subsequent courses of action.

In relation to sustainability, magical thinking is a matter of believing that certain outcomes – decoupling of economic growth and GHG emissions, a zero carbon economy – can be achieved by means that, although they may have some bearing on circumstances, are insufficient and ultimately unfit for purpose (according to the best available scientific knowledge). 

Ends and Means: Strong and Weak Sustainability

One way to frame this problem, at the most general level, is to distinguish between strong and weak sustainability, as illustrated in the table below. 

– source: developed from Sjåfjell (2018)

While strong sustainability calls for radical and systemic change guided by a biocentric preoccupation with planetary boundaries, non-negotiable ecological limits and safe operating spaces, weak sustainability signifies a more pragmatic and incremental approach to change, maintaining an anthropocentric focus on development as (economic) growth, human needs and intergenerational equity. An important point being that urgent calls for action tend to draw on the repertoire of arguments provided by strong sustainability, whereas most solutions ultimately fall under the heading of weak sustainability. They are not radical, only incremental, and certainly pragmatic. 

The question is whether it is indeed an act of magical thinking to believe that we can accomplish strong sustainability ends by weak sustainability means. In other words, that we can reach the climate targets we need to reach, according to science, by way of incremental, small steps change – holding onto the growth paradigm, the business case and win-win. 

The Magic of Win-Win

Andrew A. King and Kenneth P. Pucker, in a recent piece in Stanford Social Innovation Review, speak of “the costs of magical thinking” in relation to the prevalence of the win-win (or triple-win) mindset and associated terms such as CSV (creating shared value). They talk about “strategies [that] rely on improbable mechanisms, promise implausible outcomes, and boast effectiveness that outstrips available evidence.” Strategies that “inflict harm because they distract the business world and society from making the difficult choices needed to address pressing social and environmental issues”. 

This begs the question: What is located on the other side of win-win? How can we escape its magical allure and the often exaggerated claims made in its name? Unfortunately, King & Pucker do not have much to say about this. They speak only of how: “It is time to turn away from alluring unproven strategies and refocus our efforts on those interventions that have proven effective – such as government regulation”.

It is not a terribly convincing argument. Government regulation in the age of man-made climate change is not so much an escape from win-win as it is an embodiment of win-win – and arguably needs to be. Sustainable development is not only about climate change and climate solutions – the social and economic pillar of sustainability need to be considered alongside the environmental pillar at all times. That is, questions of social justice and of what is economically feasible also need to be addressed.    

The European Green Deal as a Win-Win Scenario

The European Green Deal is, for better or worse, an illustrative example of this. The President of the European Commission, Ursula von der Leyen, has referred to the green transition as ‘Europe’s Man on the Moon Moment’. Nevertheless, the framing of the European Green Deal reads like a textbook case of win-win, and not a very advanced one at that. As you can read on the Green Deal webpage: “Making Europe climate-neutral and protecting our natural habitat will be good for people, planet and economy. No one will be left behind.” The Green Deal is Europe’s new growth strategy, it will help cut emissions while creating new jobs and, again, it will leave no one behind.

Speaking of private businesses, the arguments for going beyond win-win are quite straightforward. There are ethical issues and matters of responsibility that need to be addressed regardless of whether the company can derive any commercial benefit from it. However, in the political realm of multiple and competing interests and policy concerns it is more difficult to escape the clutches of win-win.

Imagine if von der Leyen would have said: “We need to make sacrifices in order for the green transition to happen. We need to slow down growth, it will cost jobs and we cannot guarantee that some people will not be worse off as a result’. It is a virtually unthinkable scenario. Not least because we know that it is the poorest and most vulnerable population groups that are bound to be worse off.   

The Magic of Danish Government Policy

That is to say, government as we know it does not represent a solution to the problem of widespread magical thinking about climate change and sustainability. It is very much part of the problem and there is no apparent escape. Not even for the most advanced nations in Europe. Let us take Denmark as an example. Denmark was just ranked 4th in the 2022 Climate Change Performance Index (CCPI). As the three top spots were left empty to signal that not a single country currently deserves a ‘Very high’ rating, Denmark is supposedly the leading country in the world measured on criteria regarding climate policy, renewable energy, energy use and GHG emissions. 

This is not to say, however, that Danish climate policy is bereft of magic. Quite the contrary. Dan Jørgensen, the Danish Minister for Climate, Energy and Utilities, has become famous for waving his own kind of somewhat oversized magic wand: ‘the hockey stick’. The hockey stick was originally used (by American climatologist and geophysicist Michael E. Mann) to illustrate temperature changes over time and the transition from the Holocene era (the long shaft) to the Anthropocene era (the short blade). There is nothing magical about this science-based graph.

However, the image of the hockey stick has in recent years been appropriated by management consultants and policy makers who are using it to serve instrumental and sometimes magical purposes. In the instrumentalized imagery, the bend between shaft and blade represents the (magical) moment of innovative/technological discovery, an inflection point allowing, ideally, for a transition from a period of inferior – ineffective, unsustainable – solutions (the shaft) to a period of superior solutions (the blade). 

Dan Jørgensen has been widely criticized for his espoused belief in a long shaft (gestation) period, that tends to become longer and longer and is so far marked by a lack of truly groundbreaking results and postponement of difficult decisions (particulary regarding implementation of a CO2 tax). On the one hand, the inflection point is continually moved further and further away. On the other, it is assumed that the magical moment of discovery and transformative change will happen in time for Denmark to be able to deliver on the Paris Climate Agreement and the even more ambitious Danish climate law. 

A concrete example of magic at work in Danish climate policy is the below image from the recent government action plan on green transition. Notice in particular the small miracle that is supposed to happen from 2029-2030, where all the technical reduction potentials on display somehow reach their target of zero. It seems magical. It is certainly not well explained in the action plan how this can come about – or why the reader should find this sort of technical forecast even remotely believable.

The Great Balancing Act: Magic and Reality

There is an upside and a downside to magical thinking and political talk and action that can be said to reflect magical thinking. Today’s magical ideas may turn out to be next year’s (or the next decade’s etc.) realistic solutions or courses of action. Magical thinking blends into notions of aspirational talk and aspirational policymaking, suggesting that lofty goals can help inspire, motivate and accelerate change processes. 

However, the downside is if magical belief in win-win solutions becomes a sort of self-imposed constraint or censorship standing in the way of open and honest discussions about the changes and sacrifices needed to make the green transition happen.

This can exacerbate accusations of greenwashing and create more public cynicism regarding climate policy and the willingness and ability of the political system to act proportionately. Magical ambitions needs to connect with harsh realities.

Further Reading

King, A.A. & Pucker, K.P. (2021). The Dangerous Allure of Win-Win Strategies. Stanford Social Innovation Review, Winter. Online first.  

Sjåfjell, B. (2018). Redefining the Corporation for a Sustainable New Economy. Journal of Law and Society, 45(1), 29-45.

About the Author

Steen Vallentin is Academic Director of the CBS Sustainability Centre and Associate Professor in the Department of Management, Society and Communication at Copenhagen Business School. His research is centered on CSR as a social and political phenomenon in the broadest sense, increasingly with a focus on corporate sustainability, circular economy and business model transformation – along with the politics and aspirational aspects of sustainable development more broadly. 

Heading photo by Kristopher Roller on Unsplash.

Why we should not call for experts instead of experiments

By Jan Michael Bauer

◦ 3 min read ◦

The recent elections in Germany turned out as the historic loss for conservatives that pollsters have predicted a few weeks before. Responding to the declining poll numbers, the conservative party presented a “team for the future” consisting of several field experts that should help the candidate addressing the big challenges of the country. Their slogan was „Experts instead of experiments“. The message was clear: we know how to solve these issues and voting for another party would be an experiment and therefore risky. While this might appeal to a conservative base, I think this slogan sends a wrong if not hypocritical message.  

Framing an experiment as something uncertain and dangerous that should be avoided taints one of sciences most successful methods and obscures the undeniable level of uncertainty associated with policy decisions.

Even after acknowledging the turbulent times during Merkel’s legacy, remarkably little was done to address the challenges of the future. While some inaction might be attributed to a lack of courage or lobbying by special interests, it certainly constitutes the lack of obvious and simple solutions for the many problems the country is facing. 

The challenges we face are new and unpredicted in magnitude. While few would disagree with the need for action, there is disagreement about what needs to be done. Experts argue with each other, often struggle to persuade their colleagues, and remain unconvinced by the evidence that substantiates the oppositions claims. Fierce debates about the right course of action often overshadow a sad truth that in many cases no one is and really shouldn’t be sure that the proposed path will be the most successful one. Even more disheartening might be that even after the implementation of a policy, we often have a hard time qualifying if the intervention did more good than harm or quantifying these benefits. 

A fundamental problem, particularly economists try to resolve through (quasi-) experimental research methods to understand how a specific policy intervention works. Broadly speaking, they become experts because they do experiments. Pioneers in the study of causal relationships were recently awarded the Nobel Price. Among them David Card who is famous for a study on the effects of a higher minimum wage on employment exploiting a so-called natural experiment.  

Experimentation can help us to find out if our ideas and theories work in practice. They should increase our confidence in the people applying them rather than creating a fear of uncertainty.

Our knowledge that COVID vaccines are effective mostly relies on the result of randomized experimental trials. An approach increasingly used to answer questions in the social sciences. For instance, we don’t know how people will respond to universal basic income, which is why a three-year experimental study is currently on its way in Germany.

Pharmaceutical trials are also designed to show that potential drugs have no sever side-effects. While the necessity to ensure the safety of a drug is quite intuitive, the unintended consequences of non-medical products and services are less straight forward. For instance, social media has been suspected to inadvertently contribute to political polarization and erode democratic processes. While many of these claims are based on anecdotes, recent experimental studies from researchers outside Facebook have added hard evidence to the debate and conclude: 

Our results leave little doubt that Facebook provides large benefits for its users [but also] make clear that the downsides are real. We find that four weeks without Facebook improves subjective well-being and substantially reduces post-experiment demand, suggesting that forces such as addiction and projection bias may cause people to use Facebook [..] it also makes them less polarized by at least some measures, consistent with the concern that social media have played some role in the recent rise of polarization in the United States.

– Allcott, Hunt, Luca Braghieri, Sarah Eichmeyer, and Matthew Gentzkow. 2020. “The Welfare Effects of Social Media.” American Economic Review, 110 (3): 629-76.

There are obvious differences between vaccines and a social media platform, and probably nobody would suggest that Facebook should have undergone a randomized safety study in the mid-2000s before going public. Such products and services develop over time and can be used in very different ways. However, despite these differences there is an open question about the potential side-effects and the burden of proof. To ensure a healthy society, it might be worth considering that at least with a reasonable initial suspicion of harm, also non-medical companies should be obligated to proof their products’ safety using a suitable experimental design.

There will remain many problems where experiments are unfeasible, and, as seen with the development of Facebook, even the results of the best experiment today might not be a valid description of tomorrow in an increasingly complex and dynamic world. Such a world, however, should also humble us and our experts but foster an acknowledgement that there are many questions for which we don’t know the answer. Hence, we should make use of the best scientific methods available to reduce this uncertainty, which ultimately means that we need more experiments and not less.  

About the Author

Jan Michael Bauer is Associate Professor at Copenhagen Business School and part of the Consumer & Behavioural Insights Group at CBS Sustainability. His research interests are in the fields of sustainability, consumer behavior and decision-making.

Photo by Scott Webb on Unsplash

How the EU Taxonomy Impacts Businesses Beyond Europe

By Andreas Rasche

◦ 4 min read ◦

In 2020, the EU launched its classification system for environmentally sustainable economic activities, the so-called “EU Taxonomy Regulation” (hereafter: the Taxonomy). The Taxonomy is part of an integrated system of new EU-wide sustainability regulations, including new disclosure requirements for investors. While the Taxonomy is based on EU regulation, it can be expected that it will also have effects on businesses beyond Europe. 

Basically, there are two ways in which the Taxonomy can affect non-EU companies. First, there are direct regulatory effects on non-EU companies. Because of the global nature of financial markets and the existence of global trade flows, non-EU companies will be directly exposed to the Taxonomy in different ways. Secondly, there will also be more indirect consequences, which I call “ripple effects”. Such effects exist because the Taxonomy raises the bar globally for how sustainability information should be disclosed, by whom it should be disclosed, and it which ways it can be disclosed. I briefly discuss both effects. 

Direct Effects 

In the short run, some non-EU companies will be exposed to the Taxonomy because of direct regulatory effects. Consider the following two examples: 

  • A non-EU investor or financial advisor that wants to offer products on the European markets will be exposed to the Sustainable Finance Disclosure Regulation (SFDR) which requires an alignment with the EU Taxonomy. To offer financial products on European markets non-EU investors will therefore have to align with SFDR and hence the Taxonomy.  
  • A non-EU company with EU-based investors is very likely to receive questions from these investors about the company’s alignment with the Taxonomy. Investors need this information to meet disclosure requirements under SFDR, for instance to classify their financial products in terms of their sustainability exposure. In other words, at least some non-EU companies will start disclosing more on Taxonomy-related indicators. 

I could list more examples here (e.g., non-EU asset managers wanting to raise money in the EU), but the message is clear: the effects of the Taxonomy are not limited to businesses located in Europe. Particularly, the Taxonomy’s interaction effects with SFDR will affected non-European companies as well as investors.  

Ripple Effects

Ripple effects are more indirect effects. They occur if an intervention, such as the introduction of a new regulation, creates further effects that reach beyond the system that was supposed to be influenced by the intervention. Such regulatory ripple effects can occur in different ways.

In the context of the Taxonomy, one important ripple effect is related to the practices of European businesses. Many of these businesses are global players, and they will apply the Taxonomy to their global operations regardless of whether these operations occur in a country that is legally covered by the Taxonomy. Sustainability reporting is usually done at the corporate level and therefore also includes firms’ non-European operations. The EU’s new disclosure regulation the Corporate Sustainability Reporting Directive (CSRD) will require that such reporting at the corporate level is taxonomy-aligned. In this way, European global players will “export” the Taxonomy to other parts of the world.

There are also ripple effects at the political level. The system of new EU legislation – including, the Taxonomy, SFDR, CSRD and other regulatory elements – is unique in the world. So far, no other region or country has a comparable system. However, the major economic regions in the world have also realized that future business will be difficult without sustainability-related regulations that enhance transparency and prevent greenwashing.

Consider two recent examples: In June 2021, the UK announced the creation of a Green Technical Advisory Group. This Group is supposed to develop and implement a UK green taxonomy, which is expected to be based in part on the EU Taxonomy system (e.g., in terms of metrics). In the US, President Biden signed Executive Order (EO) 14008 during his first days in The White House. While this EO does not aim at creating a US-based taxonomy, it has created a National Climate Task Force across different federal departments, which at least some see as an important step into the direction of more rigorous ESG-related regulation. 

Other countries and regions are likely to look to Europe when thinking about how to design a workable taxonomy regulation, as the challenges that have driven the creation of the EU Taxonomy are the same throughout the world: we need more transparency around sustainable economic activities, we need to better benchmark firms’ sustainable activities, and we we need to prevent greenwashing.

It is too early to say whether there will be convergence among the taxonomies developed by different countries and regions, but one thing is for sure: they are here to stay… 

About the Author

Andreas Rasche is Professor of Business in Society and Associate Dean for the Full-Time MBA Program at Copenhagen Business School. More at: www.arasche.com. 

Photo by Krzysztof Hepner on Unsplash

White People and the Animals they Love

Book Review of Saving Endangered Species: Lessons in Wildlife Conservation from Indianapolis Prize Winners

By Lisa Ann Richey

◦ 6 min read ◦

This book review has first been published by Conservation and Society and can be also found at CBDS blog.

According to the press website, Saving Endangered Species has wide and diverse aims:  ‘to win new recruits, inspire biologists and conservationists already in the field, and illustrate the profession’s fundamental scientific tenets through wildlife champions’ own exciting narratives.’ Overall the purpose of the book is to present a moral imperative for a conservationist approach to saving nature and to do this through a collection of personal experiences from great conservationists about their love of nature and experiences from the day-to-day workings of conservation. Seven of the book’s contributors are winners of the Indianapolis Prize ‘the world’s leading award for animal conservation’ (p. 12) and one that prioritizes the inclusion of people as a ‘primary factor in the equation’ of conservation, and high levels of exposure in celebration of these ‘heroes and role models’ (p. 13).  

The book is stunning. It is an aesthetically beautiful edited volume from its entrancing animal photographs, skilled illustrations and colloquial snapshots of its famous contributors. And yet, for all its beauty, this book could have been titled, ‘White People and the Animals they Love.’

I start with my fundamental critique because for some readers, this will be all they need to hear to check this book off their ‘must read’ list. These readers, however, will be hard pressed to find other works of conservation biography that aren’t also easily critiqued for their class, racial, gender, and geographical elitism.

Also, a disclaimer, I am a social scientist who works in some of the policy spaces, ‘partnership’ imaginaries of business and helping, and geographical areas covered in this book. Thus, I am among the ‘to be inspired’ of the intended audience for this book. Additionally, the introduction, written by Dr. Robert W. Shumaker (evolutionary biologist, president and CEO of the Indianapolis Zoo) calls for ‘a more integrative approach in which the centrality of humans is recognized in the conservation agenda’ (p. 6). Thus, a review by a scholar of humans might be reasonably appropriate. 

In spite of the fact that the index does not include the term ‘celebrity,’ the book epitomizes what has come to be called ‘celebrity environmentalism’ (see Abidin, et. al 2020). The practice of scientists, film stars and social media influencers among others, who ‘enjoy public recognition, publicly support environmental causes, and benefits from their sustained public appearances’ as celebrity environmentalism may be a way of bringing new resources to conservation. 

The celebritized approach to conservation is clear from the Introduction’s start. While the reader might expect the star of this chapter to be the American Bison, named the official mammal of the United States in 2016, and depicted as a steadfast and grandiose being in the illustration that precedes the text, it is not. The star is the celebrity conservationist William T. Hornaday who initiated the first-ever zoo-based conservation effort as a result of his initial desire to provide a live bison model for better taxidermy (p.2). Thus, the scientific model for which the book collects a series of testimonies, is linked to the efforts of Hornaday. He was the director of the Bronx Zoo in 1906 when Ota Benga, a Mbuti man from Congo, was displayed in a cage in the monkey house. Hornaday wrote to the New York city mayor that ’When the history of the Zoological Park is written, this incident will form its most amusing passage.’  

Many people at that time, such as the Black clergyman Rev. James H. Gordon, were not amused. Many readers today will question the unambiguous celebration of these violent and dehumanizing roots of a movement intended to provide a moral approach to saving nature. 

Distinctions are signaled between the scientific authors and the celebrity environmentalists through engraving the masthead of every other page with a  ‘Dr.’ before the scientists, with other names presented title-less. Yet, these contributors are all performing the limited scripts of celebrity environmentalism: notably contributions enact specific tropes outlined by Abidin and her colleagues. We see contributions from the ‘Ambassador’ trope of high-profile performers who are patrons of NGOs and foundations, but whose personal commitment varies between superficial co-branding and long-term engagement. Quite prevalent is the ‘White Savior’ trope in which ‘wild places’ need to be saved from ‘locals’ through the actions of white people.  The book also highlights the ‘Activist Intellectual’ trope promoting cerebral and scientific reasons to support conservation, that then become celebritized through a focus on funding, media and elite networking. Finally, the book’s promotional writing enacts the trope of the environmental ‘Entrepreneur’ where conservation is meant to provide a good investment for business-minded people. 

The book opens with a long vignette from Harrison Ford at the 2018 Gala celebration referring to his co-contributors and others like them:  ‘You can call them researchers or scientists or conservationists. But let’s call them what they really are: These are heroes. Real heroes.’ (p. 17). However, as this book shows, the heroic narrative structure makes forging alliances and political solidarity across lines of class, race, cultures and politics quite challenging. Heroes stand above others, they are exceptional. And, as such, conservation through heroism is unsatisfactory, if not oxymoronic.

Conservation and the environmental politics that can sustain life on our planet call for less singularity, fewer stories of individuals excelling over other people and nature, and more connectedness, cooperation and coexistence. 

The introduction tells us that  ‘these are the voices of the greatest conservationists of our time’ (p. 17). I have no reason to doubt that these are their voices and that they are great conservationists, whatever criteria make up ‘greatness’. The stories are full of passion and genuine concern for conservation, so there is no doubt that these heroes are acting from noble intentions. However, the heroic hubris prevents the reflection over either why chickens when pushed off a roof don’t ‘progress well in flight’ (p. 21) or why ‘with no prior thought’ wildlife conservation should be best achieved through ‘a big cash award’ and an ‘exciting and glamourous event’ (p. 305).

With some notable exceptions, this book presents the same old stories of great men who just happen to have no reproductive obligations (with the predictable exception of the female scientist), so they can go singularly or with the support of a doting wife into long-term relationships with animals.

These men also have friends with lots of money and political clout, and the documentation of elite networking practices that comes through in the chapters actually works counter to a singular hero at the helm of conservation. Finally, these conservation heroes rely heavily on a competent staff of Black and Brown people who can put lofty ideals into practice, while not usurping the limelight from celebrity environmentalists. 

Some of the more ‘Activist Intellectual’ celebrity environmentalists present compelling arguments in lively texts around global warming and the contentious politics of saving the polar bears. Many of them take the reader through a combination of wildlife daily habits, international fundraising, and management of research and training projects. These are narrated as a partial life-history of a single ‘hero,’ and while there are nods to ‘local supporters,’ ‘scouts’ and collaborations between ‘enthusiastic’ local staff and international volunteers, this book tells a dangerous single story.

It’s time to remind ourselves and our peers that the heroic narrative of celebrity conservation may be useful for raising funds from businesses and for garnering the attention of bored bureaucrats, but it has dangerous political consequences.

A close reading of the text finds examples such as four ‘community game scouts,’ the ‘local African supporters’ in Kabara, and the ‘young Samburu warrior’ who was ‘walking in the bush’ with David Quammen, a writer from National Geographic (p.80). Samburu people have proper names, no less notable than people from Cincinnati, and the young man was not working as a warrior when assisting on a conservation project. These people are being rendered mundane through the repetitive text of the white savior narrative. They are being de-humanized as they remain in the background of the African or Asian ‘habitat’ for animals. The heroic narrative is based on an ongoing history of inequality between races, classes, genders and cultures.  

The afterword, written by the CEO of the Indianapolis Zoological Society (2002-2019) reads like advertising copy for ‘Western Civilization’ complete with God, Guns and Gold. It is a colonial vision of men like Paul Erlich in which the ‘dangers of unchecked human population’ are called out as problems while fossil fuel addiction, or all those flights to the Galas celebrating conservation heroes, are left unmentioned. The ‘Danger of a Single Story’ by Chimamanda Adichie taught an important lesson in 2009: ’The single story creates stereotypes, and the problem with stereotypes is not that they are untrue, but that they are incomplete.’ This is a beautiful book in its intentions and its aesthetics; the stories are often compelling and transport us into the lives of cranes and elephants and into some of the world’s most notable conservation initiatives. Yet, despite its intentions, the people are missing from this heroic script of celebrity environmentalism.    

Perhaps these people are left-out by design. Dr. George B. Schaller writes clearly:  ’My account here demonstrates that conservation is not part of development’ (p. 78). But, conservation is part of development. It is impossible to define conservation otherwise (Adams 2004). Both conservation and development are part of the holistic process of living sustainably on our planet. This book is intended to celebrate ’people as a primary factor in conservation.’ We do learn a lot about a particular sub-group of privileged people, their psychology and insecurities, their dreams and aspirations, about networks of elites across the globe who happen to have farms, foundations or PhD scholarships to spare. But we learn far less about the non-celebrity people in the lives of animals. Surely a global conservation movement that manifests the holistic visions and ’the connectedness of all living things’ (p. 119) that many of these contributions also embrace, needs less heroism and single stories and more solidarity, comradery and complexity. 

Further Reading

Abidin, C., Brockington, D., Goodman, M. K., Mostafanezhad, M. and Richey, L. A. (2020) “The tropes of celebrity environmentalism.” Annual Review of Environment and Resources.

Adichie, C. (2009) “The Danger of a Single Story” TED Talk.

Adams, W.M. (2004) Against Extinction. The Story of Conservation. Earthscan, London.

About the Author

Lisa Ann Richey is Professor of Globalization at the Copenhagen Business School. She works in the areas of international aid and humanitarian politics, the aid business and commodification of causes. She is the principal investigator on the Commodifying Compassion research project. https://www.lisaannrichey.com

Photo by Katie Treadway on Unsplash

Are we asking the wrong questions in corporate social responsibility (CSR) research?

By Rikke Rønholt Albertsen

◦ 3 min read ◦

The sustainability contributions of business are under increased scrutiny in society. Observations of greenwashing, blue-washing, corporate hypocrisy, and decoupling suggest the existence of an intentional or unintentional gap between espoused CSR strategies and actual sustainability outcomes at the societal level. In other words, there seems to be more “talking” than “walking”.

This has inspired a growing concern in parts of the CSR research community that maybe we have been asking the wrong questions. Is it possible that in some ways we are contributing to this gap between strategy and impact?

Next year, an entire subtheme of the annual European Group for Organisational Studies (EGOS) conference will be dedicated to “Rethinking the Impact and Performance Implications of CSR”. This subtheme will address the tendency in CSR research to focus on outcomes at the organisational level without analysing impacts at the societal level.

There are valid reasons for limiting the scope of CSR research in this way: from an organisational performance perspective, many of the traditional success criteria for CSR policies—such as strengthening legitimacy, market position, and employee satisfaction—do not require data to be gathered on sustainability impact from a societal perspective.

However, the urgency and magnitude of the current global crisis related to climate, biodiversity, and social inequality fuels the expectation that corporations should acknowledge their role in creating these crises and take decisive action to be part of the solution. From this perspective, one would expect CSR research to provide knowledge of how, when, and why CSR policies and practices truly contribute to solving sustainability challenges. Yet, as a review of current CSR literature shows, this is rarely the case [1].

So what constrains CSR researchers from addressing this impact gap? In the following, I will highlight two interrelated mechanisms that have emerged from my research.

1) Sustainability impact is non-linear, systemic, and complex.

The problem with measuring sustainability impact is that it does not conform to conventional systems of measurement and reporting. Company CSR reports primarily provide key performance indicators linked to resource use per unit of production or list company policies and protocols to ensure compliance with various sustainability standards. In general, companies tend to (self) report on the successful implementation of their (self-imposed) CSR strategy, which happens to align with existing business objectives. However, as dryly noted by former environmental minister and EU commissioner Connie Hedegaard: the need for CO2 reductions is not relative; it is absolute! The melting Arctic poles do not really care that a company has made an effort to reduce its relative emissions if the net result is still more CO2 [2].

The negative impact on ecosystems is subject to irreversible tipping points where effects compound and accelerate. Thus, the societal impact of a sustainability policy or protocol cannot merely be assessed at the organizational level. It must be traced up and down the value chain and checked for unintended systemic consequences and hidden noncompliance [3]. Think of ineffective emission off-set schemes or families impoverished by bans on child labour. Ultimately, being “less bad” does not necessarily amount to being good.

2) Researchers do not have the necessary information.

Analysing the societal impact of corporate CSR policies and practices is a highly resource intensive task, which requires an entirely different set of research skills and data access than traditional organisational research. Instead, researchers most often opt to evaluate sustainability performance through estimations, perceptions, and narratives offered by company staff in surveys and interviews [1]. This data is context specific and prone to subjective biases, making it difficult to draw objective conclusions about societal impact.

Consequently, because there is so little existing knowledge of the link between CSR initiatives and societal impact, the CSR contribution of corporations is primarily assessed based on compliance with reporting standards and commercial rating initiatives such as the Dow Jones Sustainability Index [4]. This, for lack of better options, becomes the go-to objective indicator of CSR performance used by CSR researchers. Through this self-fulfilling circular logic, these indicators are used to identify CSR high performers for research on best practice. CSR research thus potentially perpetuates the perception of what successful CSR policies and practices look like—all without examining the societal impact of these practices.

Is this a problem?

Just as corporations increasingly realise that addressing CSR issues is no longer optional, we as CSR researchers may need to move beyond asking how, when, and why corporations engage with sustainability and begin asking how, when, and why corporations contribute to sustainability. If we do not, we risk losing our relevance when corporations look to academia for guidance on how to design and implement CSR strategies based on maximum impact rather than just maximum compliance and minimal risk.

We are challenged to expand our field of enquiry and be innovative when assessing how the observed means ultimately align with desired ends. This will require forging research alliances with new knowledge fields and establishing relationships with new groups of informants beyond company employees. The first step, however, is to rethink the questions we ask.

Further reading

[1] J.-P. Imbrogiano, “Contingency in Business Sustainability Research and in the Sustainability Service Industry: A Problematization and Research Agenda,” Organization & Environment.

[2] C. Hedegaard, “Farvel til ‘logofasen’ -nu har vi set nok grønne slides,” Berlingske, 2020. [Online].

[3] F. Wijen, “Means Versus Ends In Opaque Institutional Fields: Trading Off Compliance And Achievement In Sustainability Standard Adoption,” The Academy of Management review.

[4] M. Zimek and R. J. Baumgartner, “Corporate sustainability activities and sustainability performance of first and second order,” 18th European Roundtable on Sustainable Consumption and Production Conference (ERSCP 2017).

About the Author

Rikke Rønholt Albertsen is a PhD Fellow at the Department of Management, Society and Communication at Copenhagen Business School and a member of the multidisciplinary CBS Sustainability Centre. Her research focus is on exploring and understanding gaps between the espoused sustainability objectives of corporations, and their actual contribution to sustainability. She has a background in consulting at Implement Consulting Group and in sustainability advocacy as co-founder of Global goals World Cup. 

LinkedIn Profile.

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Why transparency may not lead straight to CSR paradise

By Dennis Schoeneborn

◦ 2 min read ◦

Business firms worldwide are increasingly engaging in practices of corporate social responsibility (CSR), a trend strongly driven also by the agenda of the UN Sustainable Development Goals. However, when doing CSR, firms tend to face recurrent suspicions by the media, NGOs, and other civil society actors that they would not put the money where their mouth is; in other words, that they would adopt CSR practices only ceremonially rather than substantially (a.k.a. “greenwashing”).

High transparency demands are commonly seen as the main ‘remedy’ that would ‘cure’ firms from mere ceremonial adoption and would drive them towards substantive adoption of CSR practices. However, in recent years we can find increasing evidence that high transparency demands do not always lead straight to CSR paradise. In a Financial Times article from 2020, Jason Mitchell raised the provocative question: Is greenwashing a necessary evil? The author argues that firms often require some leeway to experiment with CSR and sustainability practices to begin with, and without such leeway CSR efforts tend to get cut off too early by too high transparency demands and greenwashing accusations. After all, some decoupling between talk and action can also be due to a time lag between aspirations and the actual implementation of CSR practices within a firm (see here).

In the same context, Patrick Haack (HEC Lausanne), Dirk Martignoni (University of Lugano), and Dennis Schoeneborn (Copenhagen Business School) have recently published an article in the Academy of Management Review that draws on a computer-based simulation to study the dynamic interplay between transparency demands and CSR practice adoptions in a field or industry. By drawing on a probabilistic Markov chain model, the authors demonstrate that under certain conditions a regime of opacity followed by transparency (i.e. intially low and later high transparency demands) “outperforms” a regime of enduring transparency (i.e. high transparency demands right from the start) with regards to maximizing the share of firms in an industry that would adopt CSR practices in a substantive way. But what are such boundary conditions?

In the article, the authors explain that the optimality of the “opacity followed by transparency” regime tends to apply only for practices that are characterized by low adoption rates (i.e. those costly to implement) as well as by low abandonment rates (i.e. once adopted firms tend to stick with the practice, also since they may face public backlash if they abandon a practice after adoption). Interestingly, these are exactly the kinds of conditions that characterize CSR as a practice area.

What to learn from all this? NGOs and other civil society actors can benefit, in the long run, from cutting business firms some slack (i.e. putting rather low transparency demands onto firms), at least in the initial stages of CSR adoption processes. Instead, societal actors should then try to increase transparency demands at later stages in the adoption process to push firms further towards substantive adoption.

Haack et al. (2021) explain this process to work due to what they call a “bait-and-switch” mechanism of CSR practice adoption. Initially lower transparency demands allow for larger numbers of firms to adopt practices, even if they do so for ceremonial reasons to begin with. Importantly, when transparency demands are then increased over time, a number of firms tend to switch from ceremonial towards substantial adoption, thus leading eventually to the desirable outcome (from a societal viewpoint) of rather high rates of substantive CSR adopters in an industry. 

Further reading

Haack, P., Martignoni, D., & Schoeneborn, D. (2021). A bait-and-switch model of corporate social responsibility. Academy of Management Review, 46(3), 440-464. 

You can also access a (non-layouted) version of the same article at ResearchGate. The article has been picked up in a recent story by Forbes magazine. And if you want to learn more about the ‘backstory’ behind the AMR article, you can watch a video interview with two of the authors, Patrick Haack and Dennis Schoeneborn, on YouTube. 

About the author

Dennis Schoeneborn is a Professor of Communication, Organization and CSR at Copenhagen Business School and a Visiting Professor of Organization Studies at Leuphana University of Lüneburg. In his research, he focuses on organization theory, organizational communication, digital media and communication, corporate social responsibility and sustainability, as well as new forms of organizing.

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Nudging for a Better Workplace: How to Gently Guide Employees Towards Ethical Behaviour

By Leonie Decrinis

◦ 2 min read ◦

Corporate scandals caused by unethical behaviour can have dramatic consequences for a company’s bottom line. The Volkswagen emission scandal created a financial damage of over 45 billion US dollars thus far. The Enron accounting scandal ended in the company’s bankruptcy back in 2001. Most recently, the #MeToo movement has brought to light sexual harassment at the Weinstein Company, Fox News and Uber, to name just a few, all subject to payments of significant fines. How can we explain such scandals and what can companies do about it? 

Why good people do bad things 

In general, when we think of bad behaviour we think of it as a matter of bad character: bad people do bad things. But research tells us that this is view is misguided. Normally, employees involved in unethical behaviour have high moral values and good intentions, in line with their companies’ sets of ethical standards. Yet, their behaviour can deviate significantly from personal and organisational principles.

In fact, the moment they engage in unethical behaviour, they might not even realise that they are doing the wrong thing. 

Context matters in explaining such ‘ethical blindness’. Environmental cues in the workplace, like monetary signals, trigger the adoption of a business decision frame, whereby people favour self-interested choices over ethical behaviour without necessarily being aware of it. By applying mechanisms of moral disengagement, they think that they are doing the right thing, while in fact acting unethically. For example, they may justify their detrimental conduct by portraying it as serving a socially worthy purpose, which makes them temporarily blind to the harm they are causing.

Building a culture of control does not solve the problem

In response to issues of moral misconduct, companies usually tighten their internal control systems. They strengthen the requirements for ethics trainings by making them mandatory and introduce monitoring and surveillance systems. They also try to incentivise ethical conduct through rewards and punishments. However, these instruments do not always lead to the intended behavioural outcomes and instead might even aggravate wrongdoing. This is because such instruments send signals that reinforce the adoption of a business decision frame, which is prone to moral disengagement. For example, in the case of Volkswagen, a CEO who led through fear and bound high expectations for engineer development to tempting bonus payments encouraged employees to circumvent the rules by engaging in emissions cheating. 

Nudging – beyond carrots and sticks

To promote ethics in the workplace, building a culture of fairness and trust is pivotal. Nudges are instruments that align with these principles. They do not mandate or forbid choices nor do they meaningfully alter the financial incentives related to various behaviours. Instead, by considering the psychology of decision-making, they try to gently guide people towards certain outcomes while preserving their freedom of choice. Nudges do so by subtly altering the context (choice architecture) in which humans make their decisions. Examples include default settings or social norm feedback as well as the simplification of information or the framing and priming of messages.

While initially mostly applied by governments to steer the behaviour of private citizens or consumers, more and more companies are relying on nudges to improve the choices of their employees.

JP Morgan, for example, uses proprietary algorithms to predict unethical trading behaviour before it occurs. Traders then receive pop-up messages prompting them to reconsider transactions when they are at risk of breaking the rules. Scientific studies further support the power of nudges in form of photos of close others or moral symbols at the workplace that encourage employees to adopt an ethical decision frame, which helps them to act in line with moral values. Overall, while much remains to be explored when it comes to ethical workplace nudging, the gentle steering tool seems to provide a promising route for improving behavioural ethics outcomes in organisations. 

Further Readings

Desai, S. D., & Kouchaki, M. (2017). Moral symbols: A necklace of garlic against unethical requests. Academy of Management Journal.

Hardin, A. E., Bauman, C. W., & Mayer, D. M. (2020). Show me the … family: How photos of meaningful relationships reduce unethical behavior at work. Organizational Behavior and Human Decision Processes.

Palazzo, G., Krings, F., & Hoffrage, U. (2012). Ethical blindness. Journal of Business Ethics.

About the Author

Leonie Decrinis is PhD fellow at Copenhagen Business School with research interests in corporate social responsibility, sustainability governance and behavioral sciences. Her PhD project focuses on applying behavioral insights to corporate sustainability in order to align governance objectives with organizational behavior.

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Are social media platforms good places to discuss global challenges?

By Daniel Lundgaard

◦ 3 min read ◦

According to a recent analysis by Datareportal, the number of active social media users grew globally by 13.2% from January 2020 to January 2021, which means that as of January 2021, there are 4.2 billion active social media users. With the increasing use of social media, it only makes sense that important discussions are moving to these platforms. This is especially seen during political elections, but social media are also becoming some of the most important platforms to discuss issues such as gender equality, racism, and climate change. However, while we have seen the potentials of social media for raising awareness about these issues, it is still unclear whether social media are suitable platforms for such discussions.

Throughout my research, I investigated the climate change debate on Twitter, and I want to highlight two important patterns that I found, each illustrating some of the potentials and challenges with the use of social media to discuss global challenges. 

The potentials

On the one hand, I found that the debates on social media platforms are characterized by equality and inclusiveness. It is common knowledge that everyone has a voice on social media, and anyone can contribute to a debate, but simply having the opportunity to contribute does not mean that everyone will have an impact.

Interestingly, what I found was that not only can anyone contribute – everyone can have an impact on the debate and affect how issues are discussed.

This both includes users with less than 100 followers and minority voices such as climate change skepticism. Seeing that even smaller users and minority voices can have an impact is particularly interesting on social media, where it has been argued that it is only the “popular” accounts, influencers, or central actors that shape the debate. Naturally, this does not mean that everyone will influence the debate, but it means that anyone can, which I see as an important part of creating a good place for discussing global challenges.  

The challenges

On the other hand, I found that the use of Twitter to discuss climate change rarely included ongoing dialogue.

There is very little exchange of opinions between two participants – instead, participants share their thoughts by engaging in broader conversations, e.g., by using specific hashtags or by mentioning central figures. In other words, what I found was that participants engage with an imagined audience, not directly with others.

Sometimes a discussion unfolds in the replies to a tweet or in the comments to a Facebook post, but the vast majority of contributions to debates about global issues are more about voicing an opinion, e.g., through retweeting, not back-and-forth dialogue between participants. This means that while most participants actively contribute to the debate, there is rarely any direct response to these contributions, which is a critical challenge, as I see some form of back-and-forth exchange of opinions as an integral part of good discussions. 

So, are social media platforms good places for debates about global challenges?

Well, yes and no – and naturally dependent on how you define a “good” debate. The inclusiveness and equality are great, and this is unparalleled compared to offline arenas that are limited by time and space, thus highlighting the potential for social media to empower citizens, both in their role as ordinary citizens and as consumers or activists that challenge corporate behavior. On the other hand, the distinct lack of ongoing, reciprocal exchange of information or dialogue is a critical challenge, highlighting issues with using social media to debate global challenges. This poses an interesting puzzle.

The lack of dialogue suggests that we need to be careful about using social media platforms to discuss global challenges.

Still, the use of social media to discuss global challenges is rapidly growing. Hence, we cannot disregard the importance of social media, but perhaps we can re-think their role in global discussions. 

I suggest that we move away from the expectation that social media platforms, by themselves, cultivate high-quality debates and instead see them as platforms that mainly inform and develop participants’ views. Hence, rather than providing platforms for dialogue, social media contributes to global debates by providing platforms where participants can become informed and better prepared for subsequent discussions – discussions that often unfold outside social media platforms. In other words, while social media, by themselves, are imperfect places for debates about global challenges, their role in informing participants, including both citizens, corporations, and politicians, illustrates that social media are a critical part of a more extensive media system, and we should not disregard their importance in debates about global challenges. 

A word of caution

However, if we accept that social media mainly serves to inform participants, we also have to consider that some potentials can become challenges. Specifically, the equality found in the debate can become a serious issue.

Without the ongoing dialogue, we miss opportunities to contest and challenge disruptive voices such as climate change skepticism.

Hence, while climate change skepticism, in an ideal and high-quality debate, could be beneficial by inspiring others to improve their arguments and refine opinions, the lack of dialogue on social media means that such voices are not contested and are not inspiring others to improve their arguments.

This is even more important with the increasing polarization we see on social media and highlights that if social media mainly serves to inform participants’ views, there is a greater responsibility on us as participants. Specifically, we still need to seek out these opposing opinions. Even though it might be futile to engage with those opinions, seeking out these opposing views may still inspire us to improve our arguments and, in some cases, even inspire us to refine our own opinions and ideas. 

About the Author

Daniel Lundgaard is a PhD Fellow at the Department of Management, Society and Communication at Copenhagen Business School. His research investigates how communication on social media (e.g. the use of emotions, certain forms of framing or linguistic features) shapes the ways we discuss and think about organizational and societal responsibilities.

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Connecting, Cohering, and Amplifying: The Work of Transformation Catalysts

By Sandra Waddock and Steve Waddell

◦ 4 min read ◦

The shocking 2021 IPCC report on the climate emergency makes clearer than ever that many human systems are in dire need of significant change. Today’s harsh growth-oriented economic systems are particularly implicated in the growing chorus of demands for purposeful system transformation towards a flourishing world for all. Significant systemic transformation is needed to bring human activities in line with both social and planetary boundaries now being breached. That means that the way we think about economics, how our businesses operate, and even how communities and whole societies operate likely need to change – and radically.  

But transforming such whole systems – economies, societies, communities, even organizations – is incredibly hard. Transformation inherently involves fundamental changes to core aspects of a given system. Things like purposes, values, goals, important assessment metrics, and even the mindsets or paradigms of people in the system must change, whether the system to be transformed is an organization, economy, or society. Our research suggests that a new type of entity – transformation catalysts – may be able to help.

What is a Transformation Catalyst?

A chemical catalyst brings about a chemical reaction without necessarily changing itself. Used in a social sense, a catalyst is a person or thing that makes something new happen or precipitates change. In the spirit of any catalyst, a transformation catalyst works with the mix of different efforts and activities that already exist and that are geared towards significantly changing a system – transformation. When this mix of change efforts, which is usually fragmented with different activities operating in separate silos, is organized, it can become a transformation system. Organized as a transformation system, these activities can be much more effective at producing desired change.

The transformation catalyst’s role is to bring together an array of efforts so that together they can emerge or develop new ways to do their work more effectively – that is, operationalize the transformation system.

We like to say that transformation catalysts connect, cohere, and amplify transformation efforts that are already underway. Four catalytic actions make this coherence and amplification of efforts possible: seeing, sensemaking, connecting, and radical action and learning.

The Four Catalytic Actions

Seeing means helping change agents figure out what their emerging transformation system is all about and who is doing what, where, and how. Seeing involves various forms of stakeholder analysis – figuring out who is in the system, which can use a variety of approaches, including interviews and mapping tools to identify key participants, resources, and system dynamics. Doing so helps participants identify where gaps and possibilities exist to create more effective action.

Sensemaking means creating a shared and coherent vision among various participants to, quite literally, make new sense of their actions and system, and tell new stories about it. These new, more powerful framings can have broad appeal to draw in other participants, raise funds, and create energy moving forward. Sensemaking also means helping participants understand how to pull together into a coherent transformation system so they can act in new ways to take more effective action.

Connecting is the process by which actors learn about each other and begin to devise new ways of acting more coherently together. Connecting involves aggregating, cohering, and, ultimately, amplifying efforts that may already be underway, but have not been as effective as desired to date. Connecting can mean creating a shared set of aspirations and identity and awareness of their own efforts as part of a broader transformation system. Then they can learn from those actions – the radical action and learning process.

Radical action and learning needs a safe space, so that participants in a transformation system can question, explore, analyze assumptions, and experiment with new ways of doing things that are transformative. Experimentation is crucial, since transformation is unpredictable by its very nature. Mistakes will be made, and things will not always work out as planned. Sometimes creating prototypes can be helpful, too, as a kind of testing ground for further action.

Catalyzing Change through 1000 Landscapes for 1 Billion People

One example that we describe in our paper is that of 1000 Landscapes for 1 Billion People. 1000 Landscapes is an initiative creating sustainable solutions by recognizing that long-term sustainability means emerging a shared foundation of land and water resources for all.

In its early stages, 1000 Landscapes consulted with more than two dozen landscape partnerships globally to figure out who was doing what (seeing). They identified what the barriers were to managing landscapes in new ways were (sensemaking).

1000 Landscapes is now building collaborative capacity for holistic landscape management in many different places, starting with an initial group of 20 and growing the number over time (connecting). Holistic land management means, as the initiative states on its website, “integrating action for food, water and health security, sustainable livelihoods, biodiversity conservation, climate action, and the transition to inclusive green economies” (sensemaking).

1000 Landscapes plans to expand to 50 areas in its second phase (amplifying). Its goal is reaching at least 1000 landscapes “meeting locally defined development and environmental goals, with benefits for over one billion people” by 2030 (amplifying and radical action). 1000 Landscapes even uses the language of catalysis to describe its work: “working in radical collaborations with dozens of organizations to catalyze system change”. It thereby “unlock[s] the transformative potential of inclusive landscape partnerships and to scale their impact”.

The Mantra for Transformation Catalysts

The key to understanding transformation catalysts is knowing that they themselves are not doing the actual transformation work. Instead, they are helping to organize other change agents who are already doing that work in new ways so that they can become more effective. Indeed, they are helping them to become effective transformation systems with the potential to overcome the many inertial forces that hold systems in place.

Small, fragmented, individual efforts cannot achieve that type of scale impact. But the potential that transformation catalysts bring is the ability to bring those actors together in new ways. They can help change agents see and understand new, radical possibilities for transformative change if they can act coherently together. Then they can amplify their own efforts by figuring out where the gaps in their transformation efforts are, filling those, sharing resources when appropriate, and acting more effectively.

Connect, cohere, and amplify. That is the mantra for transformation catalysts.

Further Reading

Waddock, S., and S. Waddell (2021). Transformation Catalysts: Weaving Transformational Change for a Flourishing World for All. Cadmus, 4(4), 165-182.

Lee, J.Y. and S. Waddock (2021). How Transformation Catalysts Take Catalytic Action. Sustainability, 13(17), 9813. 

About the Authors

Sandra Waddock is Galligan Chair of Strategy, Carroll School Scholar of Corporate Responsibility, and Professor of Management at Boston College’s Carroll School of Management.

Steve Waddell is founder and co-lead steward of Bounce Beyond, a transformation catalyst oriented to changing towards transforming towards next economies.

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Social impact bonds in the Nordics: insights from ‘Copenhagen Impact Investing Days 2021’

By Mikkel M. Andersen and Ferran Torres

◦ 5 min read ◦

A social impact bond (SIB) is an innovative model for public service delivery characterized by flexible service interventions and an outcomes-based payment structure. SIBs use private investments to drive new types of welfare activities, shifting the risk from the public to the private sector. Today, several SIBs are emerging in Nordic countries, but do rich welfare states even need these financing mechanisms? And in case they do, for what? These questions were discussed by three leading SIB-experts during the ‘Copenhagen Impact Investing Days’ 2021.

During the last few years, the use of social impact bonds (SIBs) and other social finance-instruments has increased dramatically in Nordic countries. SIBs were originally used as financing tools supporting public organizations in the UK experiencing budgetary restraints. Thus, as the model spread into other contexts, the question begged whether this tool would be appropriate for Nordic countries as well. The following piece summarizes some key reflections from the panel discussion regarding this question at Copenhagen Impact Investing Days 2021 (CIID). 

SIBs in the Nordic countries: an emergent but fast-growing field 

While more than 200 SIBs have officially been developed worldwide, they are still an emergent phenomenon in most Nordic countries. Currently, 17 SIBs have been initiated in Finland, Sweden, Denmark, and Norway – primarily within employment, preventive health, and social welfare. Also, at least 7 additional SIB-projects have been announced. The first SIB-evaluations are also starting to come up; for example, the assessment of the first Swedish SIB in Norrköping shows promising social effects, despite not creating a financial return for investors. Finnish intermediary-organizations are also planning to develop SIB-projects within environmental areas, including recycling and energy efficiency in housing.

Overall, Finland seems to be on the forefront in the Nordic regions, followed by Sweden, while Denmark and Norway are a few years behind. On the investment side, significant progression is also being made. A Finnish fund-of-funds is currently being developed with an expected capital of 100 million Euro. In Sweden, work is also being done to set up a national outcomes financing structure to ensure the scaling of future outcome-based initiatives. Last, legislative action to ensure social finance practices has been taken – most recently in Denmark with Børnene Først promising more focus on social investment-practices to ensure preventive social welfare.  

Emerging practices for Nordic SIBs 

Some early experiences regarding the relevance and usage of SIBs in the Nordic countries were discussed during the CIID-conference. First and foremost, SIBs seem to be a part of a much larger trend in public welfare, oriented towards measuring, incentivizing, and resourcing towards long-term social outcomes. While SIBs might constitute effective solutions in themselves, they are also catalysts for evolving social investment practices because they can 1) showcase the benefits of new types of welfare services by linking social and economic outcomes, 2) provide practical solutions for realizing preventive and proactive welfare services, and 3) facilitate cross-sectoral coordination through new procurement frameworks by bringing new stakeholders to the table. 

The SIB can be a useful way to show the municipalities, and the government, how to buy the solutions that actually work. 

Hans Henrik Woltmann, Investment Manager, The Social Investment Fund (DK)

What seems to be critical is also the perception that SIBs in the Nordic countries should not function as a replacement to or a privatization instrument for public welfare services. Instead, SIBs should be understood as a supplement to these, allowing public actors to change how they buy public interventions while testing new welfare solutions through de-risking strategies. Still, the novelty of the method, and its experimental character, makes it challenging to assess its true potential.

Does the SIB really allow us to scale or is it just a fancy way of financing projects? I think the question is still out there 

Tomas Bokström, Project Manager, Research Institutes of Sweden
Looking into the future: necessities for a social finance-ecosystem 

Summarizing the points from the debate, SIBs in the Nordics are on the rise and have the potential to become welfare instruments themselves, and a vehicle for promoting a social investment agenda. Looking ahead, three key aspects will be important for enhancing the Nordic social finance ecosystem: 

  1. Establish more evidence from practice and leverage these actively with public organizations to spark discussions. 
  2. Insist on experimentation and a methodological openness towards the SIB-model. Its value also resides in its ability to test innovative social interventions to later diffuse them through public practices fitting better into specific welfare situations. 
  3. Follow and engage in political discussions regarding the ambitions for SIB-practices. The SIB market is still in its infancy and relies heavily on market-maturement initiatives to develop better infrastructure.

Panelists for the discussion of Nordic Impact Bonds at ‘Copenhagen Impact Investing Days 2021’:  

· Tomas Bokström, Project Manager, Research Institutes of Sweden
· Hans Henrik Woltmann, Investment Manager, The Social Investment Fund 
· Mika Pyykkö, Director, The Centre of Expertise for Impact Investing, Finland
· Mikkel Munksgaard, PhD Fellow, Department of Management, Society, and Communication, CBS (moderator)
· Ferran Torres Nadal, PhD Fellow, Esade Entrepreeurship Institute & Institute for Social Innovation, ESADE (moderator)

About the Authors

Mikkel Munksgaard Andersen is PhD Fellow, at CBS Sustainability, Department of Management, Society and Communication (MSC) at CBS. Through his PhD-project, Mikkel studies the development and implementation of social impact bonds and payment-by-results methods in Denmark. His work centralizes around the distinct characteristics of Scandinavian impact bonds and their role in supporting and financing public services. The research is driven by a participatory research design and is co-financed by Region Zealand. Mikkel has earlier worked in the social finance-field both on an academic and practical level.

Ferran Torres Nadal is PhD Fellow at the Entrepreneurship Institute and the Institute for Social Innovation, ESADE Business School in Spain. His PhD advisors are Lisa Hehenberger and Tobias Hahn. His work is focused on understanding and explaining tensions and paradoxes around complex phenomena. He is particularly interested in studying the challenges and opportunities that come with cross-sector initiatives, such as social impact bonds.   

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The Concept of Fragmented Labour Markets

By Janine Leschke and Sonja Bekker

◦ 4 min read ◦

The employment and social impacts of the Covid-19 pandemic have been larger on some groups of workers than others. In particular, low-wage workers and workers in forms of employment that differ from full-time wage and salary work with a permanent contract seem to have been especially exposed to job and income losses (see ILO-OECD Covid-19 report). The concept of fragmented labour markets, which we propose here, highlights the large and growing diversity in employment relationships. It demonstrates the relevance of relating the impact of the crisis on jobs, income and social security to the degree of ‘resilience’ workers had prior to the crisis in terms of job stability and decent earnings. It is therefore very suitable for detecting vulnerabilities that have been built into labour markets over the past decades.

Rise of diverse types of non-standard employment relationships

The concept of fragmented labour markets focuses on the group of workers commonly termed ‘outsiders’ or the population in non-standard (also termed atypical) employment. It goes beyond traditional views on segmented, dual or primary versus secondary labour markets, which divide employment into ‘good’ and ‘bad’ jobs. There are a number of arguments as to why the use of binary divisions with regard to labour market status or outcomes are obsolete, such as the substantial variety within both the groups of standard and non-standard jobs.

Over the past decades, a further fragmentation of employment status has occurred. Some speak of an ‘explosion’ of diverse types of non-standard employment relationships, making these types of jobs an often occurring or even ‘normal’ phenomenon at least for some labour market groups, such as women. Consequently, within the group of ‘outsiders’, an ever greater variety of forms of employment is materialising, making the groups themselves far from homogeneous. 

Call for a new approach

The inadequate binary division of the labour market into groups of ‘insiders’ and ‘outsiders’ has spurred a call for a new multidimensional approach to understanding inequalities in work and employment. These suggestions go beyond merely defining non-standard work as all forms of work that deviate from the standard employment relationship.

Based on the trends and observations highlighted above, we develop the concept of fragmented labour markets as a way to both define and explore the most vulnerable types of non-standard employment. We build on the work of authors who point at key elements of such a definition, including the different labour market groups that have different sets of rights and labour conditions, and refer to different employment statuses such as part-time work, fixed-term contracts, temporary agency work, self-employment, marginal employment, platform work and other ‘non-standard’ forms of employment.

Additionally, we look at the earnings that workers (can) generate with their jobs, and whether they combine several employment statuses (e.g. being part-time as well as fixed-term employed). Moreover, we zoom in on certain occupational groups. The latter focus is relevant in order to prevent certain vulnerable groups remaining ‘hidden’ in overall labour market averages (see, e.g., the example of the occupational groups of cleaners below).

Therefore, we define fragmented labour markets as:

Labour markets characterised by an accumulation of insecurities. Fragmentation is evident where workers combine non-standard employment with low wages or where they combine several forms of non-standard employment − situations that are dominant in particular occupational groups.

We argue that using the concept of labour market fragmentation may render visible which labour market groups are generally more insecure and vulnerable to job and/or income loss and fluctuations and would therefore need additional support particularly when crises occur.

Exploring selected occupational groups in Germany and the Netherlands

Using this concept exploratory with a focus on two affluent countries – Germany and the Netherlands – highlights vulnerability in some occupations, particularly among women, but at times also among men.

For instance, almost 70% of female personal care employees in Germany are part-time employed and 18% of those combine part-time employment with a fixed-term employment contract (see EU-LFS). In the Netherlands, 43% of women in the occupational group of cleaners and helpers & service employees are marginal employed (less than 15 working hours per week) and 27% of those combine marginal part-time employment with fixed-term employment. Both occupations, and particularly cleaning are at the same time characterised by low wages (see SES). These groups would have been ‘invisible’ if only data on the average economy had been used. 

Additionally, the use of the concept of labour market fragmentation shows that in some occupations and groups, there are hardly any standard jobs left.

For instance, among women in the Dutch personal care and cleaners and helpers occupations, nearly everyone has a part time job (>90%), while in Germany the vast majority of women with a cleaning and helpers occupation has a part time job (>85%). At the same time these jobs are commonly relatively poorly paid and it is not uncommon that these part-time jobs are combined with other flexible forms of employment to make ends meet.

This not only has consequences for employment and earnings security while being in a job but also has important knock-on consequences for accessibility to and adequacy of social security, which is affected to a large degree by the level of earnings and job tenure (with the exception of social minimum benefits).

The concept of fragmentation thereby transcends labour markets and its value becomes particularly evident in times of crisis. As a result of the pandemic, low-wage workers and workers in diverse forms of non-standard employment relationships have been especially exposed to job and income losses. Moreover, in times of economic downturns, new jobs will often be more likely to be non-standard contracts than in times of economic upturns.

Both in Germany and the Netherlands, social security coverage has been problematic for some of these groups during the coronavirus crisis.

Understanding the growing flexibility in labour markets

The concept of fragmentation thus assists in achieving a more profound understanding of what growing flexibility in labour markets really entails in terms of cumulative insecurities for some labour market groups. It helps fuel discussion on making social security more inclusive for workers, regardless of their labour market position. Last but not least, with respect to occupations where up to 90% of (female) workers are in non-standard employment, often combined with other forms of non-standard employment and/or low wages, it helps raise questions as to how much labour market fragmentation affluent societies can legitimise.

Further reading

Bekker, S. and Leschke, J. (2021), Fragmented labour markets in affluent societies: examples from Germany and the Netherlands, OSE Paper Series, Research Paper No.48, Brussels: European Social Observatory, 24p.

About the Authors

Janine Leschke, political scientist, is prof MSO in comparative labour market analysis. Her research interests comprise issues such atypical work, job quality, labour mobility and migration, youth unemployment, as well as gender. She is currently the Danish lead partner in the Horizon 2020 project HECAT, participant in EuSocialCit and one of the editors of Journal of European Social Policy.

Sonja Bekker is an associate professor European Social Policy at both Utrecht University and Tilburg University. Her research interests include European employment policies and social policies, particularly focused on vulnerable groups such as people with flexible employment relations, youth, people experiencing in-work poverty. She is part of the Horizon 2020 WorkYP project.

Photo by Danny Sunderman on Unsplash

The maker movement, the quiet, game-changing revolution near you #2

By Efthymios Altsitsiadis

◦ 5 min read ◦

One of the most overlooked and yet promising agents in the fight against climate change and towards realizing a circular society is the maker movement – a cultural trend that was founded on a simple premise: ordinary people manufacturing themselves what they need.

In the previous article, a glimpse of the transformative potential of democratized production for reaching the pressing societal, environmental and economic goals was attempted. The maker revolution, facilitated by the technological collaborative manufacturing capabilities can help citizens with getting access to advanced fabrication tools, skills and knowledge, to meet their own needs, reduce their carbon footprint, while creating new entrepreneurial opportunities for them and their community. For this potential to be realized, it is arguably increasingly important to understand how and why people become makers.

No movement can be successful, no community can be effective without engaging, growing, and sustaining its member base.

This was the organizing idea in the previous article. The empirical results from the Pop-Machina project were presented in overview to show the key motives, barriers and driving forces behind the decision to support and be involved in making. In this follow-up note, we complement this baseline with the next step: what can be done to act upon this knowledge.  

We draw this time insights from another running EU project – iProduce. Two large scale studies collected data from regular citizens, makers and manufacturers around Europe and the synthesis of the main quantitative results is taking place to compile some clear and actionable recommendations on how to engage with makers, existing and potential ones. The recommendations below are a preview of the upcoming report on the full findings, so it should be treated as work-in-progress snapshot.

Recommendation 1: Clearly communicate the culture of the community

On the one hand, many new makers seem to be driven by ecological and community progress beliefs and attitudes. The majority of people believe that makerspaces can make a big difference. On the other, respondents reported a lack of information with regard to the exact makerspaces’ scope and actions. Awareness about the maker-movement and its mission and benefits should not be considered a given, yet the alignment can make a considerable (and oftentimes ignored) difference in engagement. Community development and team building should be heavily promoted as in most makers, collaboration with like-minded peers is of highest priorities.

Recommendation 2: Encourage direct knowledge sharing: virtual training and skills exchange

Exchanging knowledge and gaining access to dedicated trainings is very important for makers. Such facilitations can take place digitally in which case users would expect to increase their knowledge and skills. Training could be targeted either to support a specific business venture, a creative project already underway, or for the primary purpose of gaining competencies for later use. Support in terms of direct knowledge sharing and mentorship, peer to peer online learning could be an additional option to allow existing technicians and experts to occasionally serve as mentors and advisors rather than teachers in platform-developed projects. 

Recommendation 3: Support matchmaking and professional networking

Participation in makerspaces opens up new horizons, enabling makers to reach out to a wider network which could also yield more professional opportunities. Or at least this is what the majority of the respondents expect. Makers and consumers want to be empowered, not only to depict their ideas for new products but to also be able to find expertise and manufacturing capabilities to implement them. Matchmaking services are deemed essential and at the same time, the analysis of existing roles and collaborations can set the ground for new synergies to be established and new opportunities to be identified. 

Recommendation 4: Diversity, inclusiveness, accessibility and empowerment

Makers tend to care a big deal about accessibility; they want to see action to involve groups which are underrepresented in the maker movement, such as women, elderly, low socioeconomic status groups or people with disabilities. They stress the importance of a respectful, inclusive and supportive culture, the unwarranted genderisation of tasks/interests and the need for more female role models in the social manufacturing world. While the maker movement has unique cultural elements, these are all cemented on the principles of diversity empowerment and unfettered access. 

Obviously, this list is not exhaustive. There are still so many lessons to learn, angles to explore, and diverse experiences and stories to be shared and studied that one should not treat this as anything more than a humble start. The empirical nature of these insights provides some needed confidence to these results, but as is often the case with self-reported data and online data collection methods, there are some limitations to the transferability and generalizability/representativeness of these results. Nonetheless, the people working in iProduce have put considerable effort to help practitioners, policy makers and makerspace managers better reach out to the maker base. These stakeholders sometimes must face an uphill battle, especially in the covid-era, in keeping things afloat, exploring different tools, triggers and business models. One can hope that such insights can still be useful or bring up more discussion about the way forward.   

This publication was based on the work undertaken by the European projects iPRODUCE “Unlocking the community energy potential to support the market uptake of bioenergy heating technologies”. iPRODUCE has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No 870037.

About the Author

Assistant Prof. Efthymios Altsitsiadis, PhD (male) is a behavioural economist with a mind for interdisciplinary research. A user-centricity enthusiast, Efthymios is set to help provide evidence-based answers to some of the most persistent and evasive behavioural questions in a variety of areas like sustainability, health, energy and mobility. His Phd was in decision support systems and he is currently teaching Machine Learning and Digital Behaviour at CBS. He conducts research in collaborative production and circular economy, in advanced technological agents (smart apps, avatars, chat-bot services) and has worked as a social scientist in several cross-disciplinary research projects. 

Like oil and water…. Shell’s climate responsibility and human rights

By Kristian Høyer Toft, PhD

◦ 4 min read ◦

In a landmark verdict at the district court in the Hague on 26th May this year, Royal Dutch Shell lost a case to the Dutch branch of ‘Friends of the Earth’, Milleudefensie, and other NGOs. The court ordered Shell to reduce CO2 emissions by 45% by 2030 against a 2019 baseline. The decision breaks new ground for the possibility of holding private corporations accountable for climate change – Shell-shocked and a Black Wednesday for the fossil fuel industry, according to expert commentators in international environmental law.

The verdict emphasizes the international consensus that corporations like Shell must respect basic human rights, such as the rights to life and family life. In the ruling, human rights are seen in the context of climate change and the aspirational 1.5-degree target stated in the Paris Agreement (2015), scientifically supported by the Intergovernmental Panel on Climate Change (IPCC 2018).

The verdict is a significant example of a general surge in climate litigation cases globally in which human rights are invoked.

Holding a fossil fuel company accountable based on the standard of human rights might sound as futile as the effort to mix oil and water.

And this sort of skepticism has roots in the recent history of attempts to connect business, human rights and climate change in what could be seen as a ‘bizarre triangle’ of irreconcilable corners.

However, the Shell verdict can be seen as a firm rebuttal to such skepticism. The court argued that Shell had violated the standard of care implicit in Dutch law. To clarify the content of the standard of care, the court used the United Nations Guiding Principles (UNGPs) which provide a global standard for businesses’ human rights responsibilities. This is, however, a bold interpretation in light of the UNGPs silence on human rights responsibilities with regard to climate change. 

In fact, human rights might not fit so neatly with the difficult case of climate change. Firstly, it is difficult to trace the causal links between the emitters and the victims of climate change, although this is contested by recent studies that have traced two-thirds of historical emissions to the big oil and gas companies, the so-called carbon majors.

Secondly, human rights basically apply only to the state’s duty to protect citizens, and thus only indirectly to private companies. This state-centric approach is core to the human rights regime and tradition, and the UNGPs uphold this by allocating less stringent responsibilities to non-state actors such as corporations.

However, the UNGPs also state that private companies have human rights responsibilities independently of the state. The district court in the Hague reaffirms this in its ruling against Shell, stating that corporate responsibility “exists independently of States’ abilities and/or willingness to fulfil their own human rights obligations, and does not diminish those obligations. [..] Therefore, it is not enough for companies to [..] follow the measures states take; they have an individual responsibility.” (4.4.13). 

A third source of skepticism resides in understandings of environmental law and the central role of the polluter pays principle. Accordingly, emitters are responsible for their historical output of CO2 as enshrined in the United Nations Framework Convention on Climate Change (UNFCCC 1992), but the scope is usually taken to be limited to the unit of production (scope 1), e.g. the refining of crude oil. The standard view of pollution is local, as for instance when a factory pollutes the local river. 

However, in the Shell ruling scopes 1, 2 and 3 are taken into account, meaning that consumers’ incineration also counts and therefore Shell must take responsibility for consumers’ emissions as well. The consequences of including all three scopes incur far-reaching and demanding responsibilities on corporations, where previously the distribution of responsibilities between producers and consumers has been disputed, for instance in the carbon majors case.

In sum, the Shell verdict raises the bar considerably for the expected level of corporate climate responsibility. The verdict also challenges the assumption that human rights don’t fit the complexity of climate change; though in fact the UNs first resolution on human rights and climate change appeared back in 2008. Moreover, the verdict goes against the widespread liberal assumption that businesses’ responsibilities are mainly to comply with the law of national jurisdictions and that consumers are comparably responsible for causing climate change. 

It might be time to rethink such assumptions and not simply continue ‘business as usual’ by seeing climate change and human rights-based climate litigation as a managerial risk factor to be handled instrumentally and in isolation from the moral duty to solve the climate crisis. 

One key lesson could be to acknowledge that corporate responsibilities are not just legal but moral as well, since the distinction is not so clear in soft law instruments like the UNGPs nor even in the notion of human rights themselves, not to mention the moral demands following from the need to respect and realize the targets of the Paris Agreement and related transition paths.

When the Special Representative to the United Nations on Business and Human Rights, John Ruggie, started exploring pathways for developing the field, he was inspired by the American philosopher Iris Marion Young whose ‘social connection model’ of global responsibility in supply chains suggests a forward-looking kind of responsibility for mitigating structural injustices. Young’s notion of responsibility was designed to solve large-scale structural problems like climate change by attributing responsibility to all agents according to their powers, privileges, collective capacities and level of complicity. 

This is the kind of thinking now supported in the court verdict against Shell, and it signals a new beginning where climate change reconfigures how corporations and human rights connect… perhaps making the ‘oil and water’ metaphor obsolete.

Acknowledgements

Among the many expert commentators, Annalisa Savaresi’s work provided particular inspiration for writing the blog. I am grateful to Florian Wettstein, Sara Seck, Marco Grasso, Ann E Mayer and Säde Hormio who all gave comments to my article ‘Climate change as a business and human rights issue’ published in the Business and Human Rights Journal (2020) 5(1), pp. 1-27. The blogpost is based on the approach of this article. Julie Murray was helpful with proofreading.

About the Author

Kristian Høyer Toft, PhD in Political Science, Aarhus University 2003. During 2020-21 a guest researcher at the CBS Sustainability Centre, Copenhagen Business School. His research focuses on corporate moral agency, political theory of the corporation and climate ethics and is published in Business and Human Rights Journal, Energy Research and Social Science, and in the book Corporate Responsibility and Political Philosophy: Exploring the Social Liberal Corporation (Routledge 2020). 

Photo by Irina Babina on Unsplash

The fear of becoming the hotspot of infectious diseases: Who is concerned and why?

By Fumiko Kano Glückstad

◦ 4 min read ◦

Denmark is opening the borders for tourists from our neighboring countries in Northern Europe after a long period of lock-down restrictions. This is good news for the Danish tourism having suffered with substantial revenue losses as the consequence of the Covid-19 crisis. Whereas the European countries are optimistic about the opening of their societies along with the progress of their vaccination programs, Japan in the Far East is tightening its border entry restrictions due to the latest state of emergency declarations.

Recent Japanese opinion surveys clearly indicate that Japanese are concerned about hosting the Olympic Games in Tokyo expected to kick-off in just two months. At a glance, the adverse reactions by the Japanese population seem to be triggered by the current state of emergency in addition to the delay of implementing a nation-wide vaccination program.

However, such attitudes were already indicated in a cross-cultural study conducted for the period 10 – 24 July 2020 addressing residents in the following four countries: Denmark (n=1,005), Japan (n=1,091), Italy (n=1,005) and China (n=1,013). In this blog, I will present some fundamental cultural differences observed between the Europeans and the Far East Asians investigated in this study.

In an article recently published in Frontiers in Psychology by Glückstad et al., 2021, it is reported that Japanese are generally very concerned about their local community becoming a hotspot of infectious diseases. This study asked respondents how much they agree or disagree (1: Strongly disagree — 7: Strongly agree) to the statement:

“It is concerning that our community will be crowded by foreign tourists and will potentially become a hotspot of infectious diseases”

as well as other statements explaining several factors, amongst others: 

  • their intentions of pleasure seeking (enjoying cafés and restaurants, travelling abroad as soon as possible and similar enjoyments)
  • their risk perception (worried about becoming infected, getting ill and infecting others)
  • their risk avoidance (avoiding larger groups, public transportation and travelling to destinations with high reproduction, selecting destinations with hygiene and less crowded destinations)
  • their intention to behave responsible (keeping social distance, cleaning up public spaces, using disinfectants before and after shopping)   
  • their expectation for the society to behave responsibly (tourists visiting their local community should behave properly, local businesses should make their community clean and safe, individuals should contribute to minimize the risk of spreading, importance for their local businesses to have inbound tourism)
  • their attitudes to mask wearing and hygiene (wear mask, feel safe if businesses indicate sanitary standards and if staffs wear mask)

In our recent Frontiers article, we conducted a Bayesian Network analysis (see Fig. 1) which indicates that, in Denmark and Italy, respondents who expressed higher intentions for pleasure seeking behaviors have higher probabilities of being less concerned about their local community becoming a hotspot of infectious diseases, and vice versa.

This European trend is rational in a way that the motivational drivers to seek hedonistic experiences are conflicting with the conservative risk avoidance attitudes and behaviors. However, in Japan, disregarding the level of intentions for pleasure seeking behaviors, the level of concern about their community becoming a hotspot of infectious diseases stays around 5.5 (at the level between ‘somewhat agree’ and ‘agree’). The Chinese reacted rather similar to the Japanese respondents, however, their level of concern stays around 4.6-4.8 (at the level between ‘neutral’ and ‘somewhat agree’). 

Figure 1: Total effect of factors X on the target variable Y (concern about one’s local community becoming a hotspot of an infectious disease) 

Source: modified from (Glückstad et al. 2021)

The results of our studies clearly highlight an important cultural difference. That is, Japanese who seek hedonistic experiences expressed their concern about their local community becoming a hotspot of infectious diseases caused by inbound tourism, whereas Danes and Italians who seek hedonistic experiences were less concerned about this issue, as for the Summer 2020. This difference could be explained by the so-called “independent self-schema” typically held by Westerns (Europeans) and the “interdependent self-schema” typically held by Far East Asians.

In other words, Danes and Italians who are typically based on an “independent self-schema” would realize the “positivity of the personal self” through their pleasure-seeking behaviors. In such a scenario, they would be less concerned about their local community becoming a hotspot of infectious diseases. On the other hand, Japanese who are typically based on an “interdependent self-schema” would consider a balance among different selves in their in-group relationship important and prioritize the protection of their in-group communities. The survey results presented in Glückstad et al. (2021) and the adverse reaction by Japanese to the recent Japanese opinion surveys about being host of the Olympic Games in Tokyo are good examples of such protective attitudes identified in the society based on the interdependent self-schema.

Further reading

Glückstad F.K., Wiil U.K., Mansourvar M. and Andersen P.T. (2021) Cross-Cultural Bayesian Network Analysis of Factors Affecting Residents’ Concerns About the Spread of an Infectious Disease Caused by Tourism. Frontiers in Psychology.

Schwartz, S. H. (2012). An Overview of the Schwartz Theory of Basic Values. Online Readings in Psychology and Culture.

Markus, H. R., & Kitayama, S. (2010). Cultures and selves: A cycle of mutual constitution. Perspectives on Psychological Science, 5(4), 420–430. 

Uchida, Y., Norasakkunkit, V., & Kitayama, S. (2004). Cultural Constructions of Happiness: Theory and Empirical Evidence. Journal of Happiness Studies, 5, 223–239. 

About the Author

Fumiko Kano Glückstad (FKG) is Associate Professor of Cross-Cultural Cognition at the Copenhagen Business School. Her main research interests are currently centered on cross-cultural psychology, cognitive psychology, consumer psychology and data sciences. Her research focuses on data-driven consumer analyses centers on consumers’ value priorities in life and other factors that affect their attitudes and behaviors. In particular, FKG has extensive experience in consumer research on health, dietary, environment and personal care products from Far East industries.

Photo by takahiro taguchi on Unsplash

Start me up – helping citizen engagement become the hot new kid on the block

By Isabel Fróes

◦ 4 min read ◦

In recent years, through experience and discussions in various projects and workshops dealing with urban development, this key question keeps returning: 

How to best promote citizen engagement? 

While citizen engagement is a large topic within urban development, so are entrepreneurship and grassroots movements. How do we perceive these various terms? In which ways do these forms of organization converge, where do they diverge?  More importantly, could we change the civic engagement rates if this work would be perceived as steps towards further opportunity (gaining) instead of ‘volunteer work’ (giving)?

A known challenge within citizen engagement deals with age groups. It is not difficult to engage young children (up to 12 years old) and older citizens to take part in local actions, however it becomes a struggle to engage youth and young adults as they see little return in value as results tend to be intangible or unclear.  Within this group, perception plays a big role in how ideas are sold (and consumed), so it might be time to possibly bring the concepts of civic engagement and entrepreneurship closer together.  But where do we start? 

A first point to consider is how these key concepts might be popularly understood. When mentioning citizen engagement, images of volunteers coming together to discuss, collaborate, work and vote on ideas come to mind. When talking about entrepreneurship, notions of highly driven visionaries or million dollar companies emerge.

Citizen engagement and entrepreneurship are rarely seen as equals. However, in both cases you find similarities. It is not uncommon for both groups to engage in a large amount of unpaid labour, long days, hard work and convincing people to join you and (most probably) gathering funds to execute whatever dream you may have. 

Literature covering the concepts of social entrepreneurship or community-based entrepreneurship highlights distinct formats of social entrepreneurship, both of which are top-down. In the case of grassroots entrepreneurship initiatives, articles highlight movements that emerge from “acute socio-economic, institutional, and financial resource constraints, as well as out of local knowledge and a commitment to community”, such as the one seen recently during the Covid-19 pandemic (see blogpost). It is not necessarily about creating something new, but instead, something that works for the case in focus. 

In these settings, co-creation has received a deserved attention as a method, and it has proven to be a valuable tool as it allows for diverse stakeholders to come together to develop and carry out ideas, creating shared agency. However, before that first co-creation session lies the true challenge in both user engagement and entrepreneurship: Creating momentum before the momentum, to make one person (or a few) motivated ‘out of thin air’.  

Therefore, a second point to consider is the top-down setup of projects, inviting citizens to engage with a specific topic or local pre-defined issue. Although project results might impact locals’ everyday, the personal gain might be too dissolved into the hours spent, thus people refraining from engaging. 

In order to challenge the current top-down scenario, the perception and format of these activities could be transformed to facilitating processes to let locals themselves suggest and carry the types of projects that interest them, seeing a clearer link to ‘what’s in it for me’. For unpaid efforts, the pay-off has to be visible and tangible.

Furthermore, associations, municipalities and other public institutions need to create means to replicate successful bottom-up initiatives. Some of these initiatives could then be linked to local businesses and related opportunities. 

From a service design perspective, a way to bring this information into people’s households could be to use the existing information channels popular amongst the local community to allow for an initial knowledge entry point. For instance, as citizens receive a public waste sorting information sheet, one could attach a ‘waste project opportunity’ sheet. This initial touchpoint could be a it’s your turn blueprint, a step-by-step guide showing what to do to bring your ideas out into the world. So, a project idea invitation presented as an opportunity at your fingertips.  The ‘hot themes’ in the current market should be highlighted while also offering inspirational examples. Programmes to support these initiatives should be in place, facilitating the citizen engagement startup process as a possible social ladder. Such a setup could transform current structures, making cities and citizens, not venture capitalists, the true cradle for entrepreneurship. 

This blog was inspired by a recent participation in a workshop focusing on urban development, discussing visions for green and social meeting places in urban residential areas. During the discussion, a number of key questions were raised concerning how to best promote citizen engagement.  The workshop was organized by Copenhagen University and VIVAPLAN, with presentations from VIVAPLAN, Urbanplanen Partnerskab, C40, KAB and Copenhagen Municipality. The visions discussed during the workshop are to feed into policy recommendations for sustainable and inclusive developments in Denmark and Sweden.

References

V. Ratten and I. M. Welpe, “Special issue: Community-based, social and societal entrepreneurship,” Entrepreneurship and Regional Development.

M. Wierenga, “Uncovering the scaling of innovations developed by grassroots entrepreneurs in low-income settings,” Entrep. Reg. Dev.

S. Sarkar, “Grassroots entrepreneurs and social change at the bottom of the pyramid: the role of bricolage,” Entrep. Reg. Dev.

About the Author

Isabel Fróes is a postdoc at MSC Department at Copenhagen Business School working in three EU projects (Cities-4-People, iPRODUCE and BECOOP). Isabel also has wide industry experience and has worked both as a user researcher and service design consultant for various companies in Denmark and internationally. For more detail please see her Linkedin profile.

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Corporate democratic responsibility – messy and difficult, yet urgent and without alternative

By Dieter Zinnbauer

◦ 4 min read ◦

We live in politically tumultuous times. Authoritarianism is on the rise again across the world. Democratic freedoms have been in decline for 15 years in a row. The share of people living in free societies has shrunk to a meagre 14% of the world population. Meanwhile polarisation and populism, disinformation, mistrust and rising inequality have begun to hollow out the fundaments of even the strongest democracies. Votes for populist parties in mature democracies have risen from 3% in the 1970s to more than 20% today.

With democracy under attack everywhere how does and how should business position itself? What are the democratic responsibilities of companies? A tricky question well beyond the scope of a blog entry, but here some rather random notes and provocations on current trends and gyrations as input to this highly topical conversation.

Inaction is untenable, political neutrality unlikely.

It is less and less of a practical option anymore to hide behind a veneer of political neutrality no matter if rationalized instrumentally  (the Republicans-are-buying-sneakers-too argument), normatively (it’s undemocratic for business to engage in high stakes politics beyond its own narrow business interests) or intuitively (the empirically tenuous claim that business tends to only support moderate, mainstream politics anyway).  Here some reasons why:

For a start, it is not easy to find  real-world contexts, where a principled commitment to free and fair markets and a principled rejection of crony capitalism would not also imply and indeed be predicated upon a commitment to competitive democracy.  Or from a slightly different angle, the normative minimum for business – to respect human rights in its sphere of operation and influence –also entails respect for basic democratic rights and a related duty of care.

Remaining silent on democracy is therefore only an option as long as democracy is not in danger, as long as none of the substantive political forces in a country seek to actively dismantle load-bearing democratic norms and rules.

Yet in many countries this is not the case (any more). From Brazil to the Philippines from Poland or Hungary to the US, formally democratic regimes are under attack from within the political establishment. And in many more other countries fringe groups with dubious democratic credentials and intent often propelled by a toxic mix of populism and nativism are moving closer to becoming part of government. 

Enter corporate democratic responsibility

Corporate responsibility in such contexts entails having a plan for and executing on corporate democratic responsibility on at least three different levels / time horizons. 

  • For a start and most immediately it requires aligning non-market strategies with regard to corporate support for politicians, lobbying, public relations and other business and society interactions with an active stance and role in support of democracy.  E.g. no funding for politicians and parties that have taken to destroying basic tenets of inclusive political participation (not just temporary bans until the PR tempest calms down), no lobbing on issues that corrode the fundaments of political equality, an active promotion of democratic values, for example along the lines of campaigns by German business associations against extremism.
  • In the medium term it calls for a democracy audit – an active interrogation of one’s own operations’ “democracy footprint”, and how one’s business model can best respect, protect and promote democratic values. Big tech platforms, for example, are being pushed to better understand and address their role for a healthy democratic discourse. 
  • In long-term perspective it demands a deeper probing on how corporate conduct is linked to some of the underlying drivers of democratic decline and disillusionment. Growing inequality and declining social mobility, status anxiety and a profound sense of losing out and losing authorship of one’s life are all empirically confirmed to provide fertile ground for populism and creeping authoritarianism. To help restore a sense of individual economic and political efficacy, trust in societal fairness and public as well as private authority companies may wish to interrogate how practices around tax avoidance, regulatory arbitrage, shareholder primacy etc. intersect with these issues. This also includes questions around how reforms and new formats in corporate governance can help resurrect a sense of being in it together and revive the idea of the business organisation as a shared venture, an important venue for exercising citizenship and co-authoring one’s economic life world and, capable of collectively evolving  a strong, responsible corporate purpose.
A rough, but necessary ride ahead

Good corporate democratic responsibility does not come easy. It means wading into a messy terrain and facing up to the perennial tension between defending democracy and curtailing freedom. 

It involves business decisions on whether fitness-bikes should be permitted to spread rumours about voter fraud, whether couches and guest rooms should welcome riot tourists, whether rumour-mongers deserve cloud hosting or whether the president of the United States should be kicked off the world’s largest social network.  Yet, all these things need to be reckoned with one way or the other as doing-nothing only cements a status quo of what is often democratic backsliding.

All these tricky questions around corporate behaviour in the context of democratic countries that are at risk of backsliding will also bring into sharper relief the perennial question of what companies can and should do when operating in outright authoritarian settings – a discussion well beyond the scope of this short blog entry but one that is returning with a vengeance given high-growth prospects in authoritarian settings or military coups in popular foreign investment destinations.

Finally, an honest grappling with corporate democratic responsibility will be agnostic to partisanship in principle and approach. But it is highly likely to be partisan in outcomes. Political incivility and anti-democratic behaviour are unlikely to be evenly distributed across the ideological spectrum in any given setting. So brace yourself for a partisan backlash and for a constant tight-rope walk between supporting democracy and being drawn into day-to-day politics.  Getting this right will require the best of corporate strategy, corporate governance and corporate communication. But ultimately there is no escaping from corporate democratic responsibility. Flourishing economies and flourishing democracies ultimately depend on it.  

About the Author

Dieter Zinnbauer is a Marie-Skłodowska-Curie Fellow at CBS’ Department of Management, Society and Communication. His CBS research focuses on business as political actor in the context of big data, populism and “corporate purpose fatigue”.

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Mapping unchartered territory: Ecuador’s journey to sustainable palm oil

By Mathilde Birn, Sanne Qvarfordh, & Dr. Kristjan Jespersen

◦ 3 min read ◦

Sustainability certifications have become a widely used mechanism to signal to consumers that a product was ostensibly produced sustainably. Nevertheless, such certifications typically fail to scale beyond at most a fifth of global production. Within the palm oil sector, widely known as a major deforestation driver, the Roundtable for Sustainable Palm Oil (RSPO)’s Jurisdictional Approach is one of a growing number of examples of upscaling strategies. Under the Jurisdictional Approach, all value-chain actors within a province or even an entire country would be certified simultaneously. Ecuador is piloting the initiative at the national scale and is currently developing a national commitment.

The research is informed by 21 interviews with a variety of actors in the Ecuadorian palm oil sector. After qualitatively coding these interviews and looking for common patterns, we identified four main motivations behind Ecuadorian interest in jurisdictional palm oil certification. First, interviewees reported a concern that Ecuador risked losing market access due to sustainability-related import restrictions and consumer preferences in certain markets. Second, 90% of Ecuador’s palm oil producers are smallholders, whose resource limitations make it difficult to achieve RSPO certification on their own. Under the Jurisdictional Approach, smallholders would be grouped together, allowing them to pool resources and share costs. Third, the Jurisdictional Approach facilitates governmental sponsorship for smallholder capacity building. Fourth, previous experience and institution-building around sustainability in general and anti-deforestation in particular produced forward momentum on the part of the civil society and the Ecuadorian government that has led to an institutional infrastructure favourable to ideas like the Jurisdictional Approach.

In the most optimistic scenario, the Ecuadorian government’s commitment to the Jurisdictional Approach, strengthened by multi-stakeholder support, could encourage more sustainable production practices. However, we also identified certain risks associated with the implementation of the initiative. These risks especially significant given the Jurisdictional Approach’s relative novelty. As one interviewee put it: “we have been flying the plane while we’re building the plane”.

We have identified six key risks to Ecuador’s implementation of the RSPO Jurisdictional Approach and paired them with mitigation recommendations. This list is certainly not exhaustive and ought to be further assessed and developed by local stakeholders equipped with relevant expertise.

The Jurisdictional Approach affects several different stakeholder groups with diverse interests that must be actively engaged in the process to achieve success. To this end, efforts should be made to include representatives of stakeholders that are currently missing (or insufficiently represented) in the governance structure of the RSPO Jurisdictional Approach in Ecuador. These stakeholders include academia (which was involved in the beginning of the process but no longer is), domestic civil society organizations, local communities (including Afro-Ecuadorian and indigenous peoples), local governments, and representatives of the global palm oil industry.

About the Authors

Mathilde Birn graduated from CBS with a BSc and MSc degree in International Business and Politics. Academically, her main interest is within the field of sustainable development and the impact of stakeholder dynamics on such development, with a focus on emerging economies.

Sanne Qvarfordh graduated from CBS with a BSc. and a MSc. degree in International Business and Politics. Her main academic interest is sustainable development in emerging economies, with a focus on multi-stakeholder initiatives in Latin America.

Kristjan Jespersen is an Associate Professor at the Copenhagen Business School. He studies on the growing development and management of Ecosystem Services in developing countries. Within the field, Kristjan focuses his attention on the institutional legitimacy of such initiatives and the overall compensation tools used to ensure compliance.

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Is Seeing Knowing? When Visibility Reduce Transparency

By Lars Thøger Christensen

◦ 3 min read ◦

We are arguably living in an era of visibility in which our communicative interactions with others are accessible to the gaze of third parties. Does this mean we understand our fellow beings, our organizations and our governments better? Well, not quite and maybe not as expected.

We tend to assume that we understand what we see. Yet, we see a lot that we do not grasp.

Increased visibility is often taken to represent an increase in transparency. Thus, for example, it is commonplace to associate organizational transparency with visibility management. Many writers use the notions interchangeably as if we automatically comprehend what we see. Such assumption is misguided. Although transparency has come to refer to a host of different qualities and activities, its original and fundamental promise is to increase knowledge and insight and, this way, reduce manipulation, ensure fairness and avoid power abuse (see previous blog). Visibility on its part merely signifies the ability to identify by the eye.

Although it intuitively makes sense to treat these terms as related, especially because they both invoke an ocular metaphor, they differ significantly in terms of the depth of the involved perception. Transparency, in spite of its complexities, absurdities and unexpected consequences when implemented in practice, continues to invoke the ideal of some deeper understanding. What is visible, by contrast, may arouse our attention only in passing without producing any further insight. The conflation of the two therefore weakens our approach to transparency and reduce society’s ability to develop more sophisticated transparency practices.

Visibility is not the same as transparency and may not enhance understanding and insight. 

‘Visibility’ has several related meanings, including the state of being visible, the ability to see or be seen under certain conditions, and the distance at which a given object can be identified with the unaided eye, also known as visual range. In all these senses, visibility is related to observation and suggests that the object in question is accessible to the eye and can be distinguished more or less clearly from its surroundings. While technological developments have turned visibility into a mediated quality freed from the temporal and spatial constraints of the here and now, the visible still refers to “that which is perceptible by the sense of sight”, perhaps augmented by other senses. 

What is perceptible to the eye is heavily shaped by contexts, such as norms, cultures and social structures.

In everyday usage, the notion of visibility is frequently invoked in a more abstract sense that combines sight with understanding. Notions such as discover, observe, notice, recognize, monitor, viewpoint, or perspective, for example, all invoke both dimensions and contribute to the impression that what we see is what we comprehend. As Brighenti (2007) puts it “vision is alias for intellectual apprehension” (p. 327). This belief may explain ambitions to uncoverand expose reality to the naked eye. Although such ambition is often driven by social indignation and a desire for fairness and change, major data leakages such as WikiLeaks illustrate that visibility may confuse, frustrate or pacify rather than inform.

The eye and what it allows us to see is a frequent source of illusion.

Leaving aside the possibility of optical illusions, although this is a quite realistic prospect in a world saturated with images, the gaze is a frequent source of blindness. While the promise of transparency is to help the spectator see into something, there is always the risk that the gaze is blunted or bored by impressions to the effect that objects accessible to the eye are seen through and ignored. Even when this is not the case, the lack of an Archimedean point of observation from which an observer can perceive the object of inquiry in its totality seriously challenges the notion of a single perspective on reality and thereby conventional conception of transparency as visibility. 

Without knowing in advance what to look for, visibility is likely to confuse more than inform.

While the gaze is obviously never “naked” or innocent, it takes a trained gaze as well as understanding of local norms, mores and myths, as anthropologists are aware of, to look systematically and to know what to look for. This problem is evident when we are invited to “see for ourselves”, but lack professional experience to differentiate between relevant and irrelevant material and events. When organizations of various sorts, for example, host “open house” days – a practice that is quite common in in all kinds of organizations from organic farming to higher education – visitors may be able to see a lot without necessarily knowing what to make of it. Here, visibility only makes sense because it is placed in a context of a well-known social ritual.

What happens to insight if visibility affects the objects we intend to understand?

In addition to the limitations of the gaze itself, it is well-known that objects of attention are significantly affected by processes of observation. While system theorists have argued that the properties of an object are relative to the observer, breakthroughs in quantum physics have demonstrated that even small particles behave quite differently when observed. The behavioural effects of visibility are likely to be even more dramatic when the objects of attention are human beings. In such cases, whatever is visible is likely to be shaped by power plays and image management. 

Visibility is a trap.

(Foucault, 1977, p. 200).

The very possibility of being observed affects the behavior of those within visual range. While Foucault described this tendency in the context of prisons, Bernstein has demonstrated how it affects work practices. However, whereas Foucault emphasized that visibility enforce self-discipline, Bernstein illustrates that visibility may reduce productivity because it removes attention from working effectively to practices of signaling that the correct procedures are followed. 

When impression management is prevailing, what we see are ideals rather than actual practices.

When scholars and social critics take visibility to mean transparency, they reproduce a deep-seated conviction that the gaze is a primary source of insight. By maintaining a close link between visibility and transparency, transparency is reduced to a surface phenomenon that only requires accessibly to the eye. Hereby, what visibility does or conceals is ignored. Increasing visibility may hide an object in plain sight. It may also dazzle the observer in ways that reduce the ability to understand what goes on.

The fascination with visibility needs to be tempered by a persistent aspiration for knowledge and real insight.

Further readings

Bernstein, E.S. (2012). The transparency paradox: A role for privacy in organizational learning and operational control. Administrative Science Quarterly, 57(2), 181-216. 

Brighenti, A. (2007). Visibility. A category for the social sciences. Current Sociology, 55(3), 323-342.

Foucault, M. (1977). Discipline and punish. The birth of the prison. London: The Penguin Group.

Neyland, D. (2007). Achieving transparency : The visible, invisible and divisible in academic accountability networks. Organization, 14(4). 499-516.

Roberts, A. (2012). WikiLeaks: The illusion of transparency. International Review of Administrative Sciences, 78(1): 116-133.

Stohl, C., Stohl, M., & Leonardi, P. M. (2016). Digital age—Managing opacity: Information visibility and the paradox of transparency in the digital age. International Journal of Communication, 10, 123-137.

About the Author

Lars Thøger Christensen is Professor of Communication and Organization at the Copenhagen Business School, Denmark.

Source: Photo by Jonathan Borba on Unsplash

Unaccounted Risk: The Case of Sulfur Hexafluoride (SF6) in Offshore Wind Energy

By Esben Holst & Dr. Kristjan Jespersen

◦ 5 min read ◦

Carbon accounting provides a science-based measurement of greenhouse gas (GHG) emissions, achieving greater accountability of companies’ emissions causing global warming. GHGs are reported in CO2 equivalents (CO2e), meaning GHGs with widely different chemical qualities and environmental impact can be presented in a single understandable metric. However, the underlying methodology is debatable. This article questions whether the CO2e of Sulfur Hexafluoride (SF6) is misreported.

What is SF6 and why is it a hurdle for a green energy transition?

SF6 is used as an insulator in a wide variety of electrical equipment, mainly to prevent fires in incidents of short circuits. It is found in transformers inside windmills, offshore and onshore substations, and in power cables.

(Illustration to the left shows a sideview of a windmill turbine – Source: CAT-Engines. Right: an offshore wind energy system – Source: Nordsee One GmbH)

SF6 is a synthetic man-made GHG and cannot be reabsorbed naturally like CO2, meaning once emitted, it does irreversible damage. Most GHGs remain in the atmosphere around 100 years – SF6 remains for 3,200 years. These numbers are given by the Greenhouse Gas Protocol (GGP) based on calculations by the Intergovernmental Panel on Climate Change (IPCC). 

The IPCC’s metric Global Warming Potential (GWP), reveals environmental harm of a given GHG in CO2e. What then, makes SF6 problematic when converted into CO2e? SF6 has a GWP 23,500 times higher than CO2 – a value that is difficult to comprehend. The GWP metric is calculated using a 100-year timeframe based on GHG’s environmental harm. Yet, SF6 has an atmospheric lifetime of 3,200 years, essentially leaving 3,100 years of environmental harm unaccounted for. Using a simple logarithmic function incorporating IPCC data accounting for the missing 3,100 years, the GWP almost doubles. As illustrated below, this indicates how SF6 may be misrepresented in terms of environmental harm in CO2e emissions reporting.

As found by AGAGE – MIT & NASA, other worrying trends are observed. The atmospheric concentration of SF6 has more than doubled in the past 20 years. Luckily, its current concentration in the atmosphere remains low relative to other GHGs such as Methane or Nitrous Oxide.

Source: AGAGE

Regardless, the GWP of these two GHGs pales in comparison to the mindboggling detrimental effect of SF6 on the environment. Emitting this gas should therefore be strictly regulated.

Greenhouse Gas Emissions Reporting – Diverging Approaches

It only takes a little digging into offshore wind energy players to uncover diverging conversion methods of SF6 into CO2 equivalents (CO2e). The GHG emissions reporting methodologies of industry leaders use different emissions factors to convert SF6 into CO2e. An example of underreporting is illustrated by Vattenfall in their 2019 sustainability report, reporting SF6 as 15,000 times more potent than CO2. The emissions factor given by the GGP is 23,500. Ørsted uses a GGP emissions factor for the same gas in their 2019 ESG report. Yet, while Energinet also states it uses the GGP reporting framework in their 2020 CSR report, it uses an emissions factor of 22,800. The ownership distribution between Vattenfall and Ørsted in the Danish wind farm Horns Rev 1 of 40% and 60% respectively, thus blurs accountability and severity of reported emissions. As highlighted by the BBC, atmospheric concentration of SF6 is ten times the reported amount by countries. The IPCC and GGP are also aware of this.

During the past decade…actual SF6 emissions from developed countries are at least twice the reported values. (Fifth Assessment Report of the IPPC)

Measuring Impact of SF6 Leaks by Offshore Wind Players

SF6 emissions will rise exponentially alongside expanding electrified energy infrastructure using equipment containing this gas. This, together with repeated SF6 leaks, perpetuates the worryingly steep upward trend in atmospheric content of SF6 shown above. In 2020, Energinet reported a leak of 763.84kg SF6, or 17,950,240kg CO2e. The environmental impact of this leak is about the same as the emissions of 53 SpaceX rocket launches. Energinet has since admitted to years of underreporting of SF6, leading to amended SF6 emissions related to normal operations doubling.

Leaks of SF6 are too common. In Ørsted’s 2020 ESG report, a major leak at Asnæs Power Station was mentioned without disclosing the actual amount – withholding important risk-related data from investors. However, Energinet disclosed an SF6 leak of 527kg at that same facility in their 2020 CSR report. The leak for which Ørsted is responsible, yet feels is not material to disclose, is therefore potentially around 12,384,500kg CO2e. Indicating light at the end of the tunnel, Vestas has included SF6 on their Restricted Materials list since 2017, as well as introducing a take-back scheme for infrastructure containing this gas – setting a better example for business models of our green energy transition leaders.

Strengthening the Global Response to Climate Change Risk

It is vital that we understand SF6 is so detrimental to fighting climate change beyond 2100 that it has no place in sustainable business models today. Even if CO2 emissions are reduced in alignment with 2100 Paris Agreement goals, reporting in a 100-year timeframe will not save a planet billions of years old. GHG reporting must be better regulated and scrutinised in order to deliver a truly green energy transition. Releasing a gas causing irreversible damage cannot be an acceptable trade-off for a short-term “green” transition. While most company reports claim no alternatives exist, this is not true. Therefore, SF6-free equipment must be mandatorily installed.

A green transition goes beyond 2100, yet poor regulation enables energy companies to present SF6-CO2e favourably by using lower emission factors. Offshore wind energy players have not provided comparable, accountable, and transparent reporting – indicating stricter regulations on GHG reporting are necessary.

The Way Forward: Better Regulation

In 2014, an EU regulation banned the use of SF6 in all applications except energy after lobbyists argued no alternatives exist. The EU acknowledges the environmental harm of SF6, yet EU action has been described as inadequate. Asset managers, institutional and retail investors are exposed to hidden environmental risks related to SF6 in terms of double materiality. Double materiality referring to the financial costs related to management of SF6 incurred once completely banned. Non-financial reporting of GHG emissions and CO2e needs to be regulated far more than current global regulations. Investors, society, and most of all our environment deserves better protection.

NOTE: This article is based on a Copenhagen Business School (CBS) research paper in the course ‘ESG, Sustainable & Impact Investment’ taught by Kristjan Jespersen – Associate Professor at CBS – as part of the newly introduced Minor in ESG. The paper questions the greenness of wind energy by using the case of three large offshore wind energy farms in Denmark: Horns Rev 1 & 2 and Kriegers Flak. The findings are based on ESG, sustainability & annual reports from 2015-2019 of all involved OEMs, manufacturers, operators, and energy grid providers. Implications of the findings point to a coming hurdle within the electrification of a global green energy infrastructure transition. 

About the Authors

Esben Holst, an SDG and CSR research intern at Sustainify, is a Danish-Luxembourgish masters student at Copenhagen Business School. Besides attending the newly introduced Minor in ESG at CBS, his past studies focus on international business in Asia and business development studies.

Kristjan Jespersen is an Associate Professor at the Copenhagen Business School. He studies on the growing development and management of Ecosystem Services in developing countries. Within the field, Kristjan focuses his attention on the institutional legitimacy of such initiatives and the overall compensation tools used to ensure compliance.

Photo by Karyatid on Unsplash

Responsible to whom and for what?

Contestations of CSR across time, space, and experience … and a Call for Papers 

By Jeremy Moon

◦ 3 min read ◦

It is well known that globalization of business has thrown up a host of new governance challenges and new governance solutions. Conspicuous in this regard are the various ‘responsibility remedies’ for challenges posed in the supply chains of multinational corporations.

The growth and transformation of supply chains, particularly in agricultural products and garments has reflected a pattern of business expansion and penetration of host country markets. These have been followed by revelations of short-comings in the treatment of workers and communities, and in environmental responsibility. And in turn, these have been followed by responsibility remedies, often in the form of partnerships, international standards and multi-stakeholder initiatives.  

Formerly, if corporations were asked to whom they were socially responsible they might well have answered ‘to their communities’ or ‘to their stakeholders’. The concept of responsibility to communities makes sense in an industrial model of production in which the company, its management and workers are united not only by association with the company but also by the place in which the company had its most obvious impacts. The concept of responsibility to stakeholders is premised on its offer of an alternative to exclusive responsibility to shareholders, combining an ethical and a functional logic. But with global supply chains, the concepts of community and stakeholder responsibility are stretched.  In the former case this is to relationships with no face-to-face interaction or even common identity with place and culture. In the latter case it is to corporate relationships with workers who have no contractual relationship with the respective corporation, and may even be unaware that they are working in that corporation’s supply chain.

So we have witnessed numerous alternative models of supply chain responsibility often in the form of partnerships of businesses and civil society organizations, sometimes also involving local, national and international governments. The legitimacy of these partnerships, standards organizations and Multi-Stakeholder Initiatives (MSIs) is usually premised on some reference to, what are taken to be, universal principles, and on the plurality of participants, particularly those reflecting societal voice – ostensibly the surrogates of community and stakeholders.

But notwithstanding the legitimacy that these responsibility remedies initially attracted, research increasingly sheds doubts on their ability to resolve the responsibility question because they tend to obscure conceptions to whom and for what business is responsible for, and specifically by marginalizing representation from the global South – or the production-based economies of the supply chains.  

In my own work, I have seen tensions between host governments and international remedies for oppressive labour standards, with the former regarding such ostensibly well-intentioned initiatives as subversive to their own authority. There are tensions between host country suppliers and international brands and retailers with some of the former going out of business for not readily complying with new standards or complaining that they bear disproportionate costs of factory upgrading. And there are tensions experienced by workers whether with their own governments for regulatory failure, with their immediate employers for low wages and poor conditions, or with international supply chains which structure their livelihoods. But these tensions are often not articulated by virtue of the weak labour organization (often compounded by political environments hostile to organized labour). 

As a result from global South perspectives the new variants of the social responsibility model look ill-suited to the ‘on the ground’ economic, social and environmental challenges, at best. At worse, they look like a legitimization of a continuing model of exploitation.

A forthcoming special issue of the journal Human Relations, ‘Contesting Social Responsibilities of Business: Experiences in Context‘ is devoted to addressing such issues.  Core questions that the SI is designed to address include:

  • How do individuals, groups and communities from various geographic and geo-political contexts experience the imposition of social responsibilities and practices from businesses of all forms? 
  • How are social responsibilities and their related institutions and practices transformed, subverted and/or resisted within, across and outside of organizations and workplaces?

Moreover, the SI editors will also welcome papers on wider issues arising from the social responsibility of business, specifically to highlight perspectives borne of contextual experiences.  

A Special Issue workshop will be held on Thursday 16th September 2021 (applications by Monday 21st June 2021. To be considered for this special issue, full-length papers should be submitted through the journal’s online submission system between February 1st and 28th 2022.

For full details on the call, the workshop and the submission processes please follow this link.

About the Authors

Jeremy Moon is Professor at Copenhagen Business School, Chair of Sustainability Governance Group and Director of CBS Sustainability. Jeremy has written widely about the rise, context, dynamics and impact of CSR.  He is particularly interested in corporations’ political roles and in the regulation of CSR and corporate sustainability.

On behalf of the Guest Editors: Premilla D’Cruz, Nolywé Delannon, Lauren McCarthy, Arno Kourula, Jeremy Moon and Laura J. Spence; and the Human Relations Associate Editor: Jean-Pascal Gond.

Megacorporations

By Glen Whelan

◦ 2 min read ◦

Whatever you did today, there is a fair chance that you used a product or service that is somehow connected to Alphabet. If you watched YouTube on your Android phone in an Uber, for example, then you were simultaneously contributing to Alphabet’s coffers in three ways. And on the off chance that you were thinking of enjoying your evening by first reading two new papers – on the naked mole-rat as a non-aging mammal and what classic Atari video games can tell us about the human brain respectively – and then planning out your possible life on Mars, then you would once again be thrice-engaged with Alphabet investments.

As these examples suggest, Alphabet, whose most famous asset is Google, is not just any other corporation. Rather, it is what can be termed – in building on an idea associated with the novelist William Gibson – a megacorporation.

For the present purpose, a megacorporation can be simply defined as a corporation that influences the lives of a huge number of people in fundamental ways; whose sway is greater than that of most other organizations combined. 

Perhaps the clearest historical example of a megacorporation is the English East India Company. Following its establishment in 1600, ‘the Company’ proved itself a formidable commercial, governmental and military force. Indeed, and whilst the Company was gradually disbanded around the middle of the 19th century, it still exerts influence today through its having shaped, amongst other things, a worldwide thirst for tea, the way in which people conceive of the ‘firm’, and, more controversially, how people understand the ‘orient’.

When the continuing influence of the English East India Company is acknowledged alongside Alphabet’s current scale (e.g., it is currently valued at more than $1.5 trillion), vague claims from the latter’s elite that it might exist 100 or even 1000 years from now, are not as ridiculous as they might first seem. Moreover, if predictions by Google’s Director of Engineering, Ray Kurzweil, come true, then at least some of us could still be around in digital form, and able to confirm whether or not Alphabet is still going strong a thousand years hence. Of course, if your (happy) digital existence is dependent on Alphabet technologies, then you would have reason for wanting the megacorporation’s reign to be a very long one.  

Such speculations about Alphabet’s centrality to our future existence may ultimately prove more fanciful than factual. Be this as it may, it is difficult to deny that Alphabet already records, stores and shapes the past in major ways. For many people Alphabet is the custodian of their personal memories, the story of their life. Through its control of Gmail and Google Photos, and its vast array of ‘smart home’ technologies, Alphabet collects seemingly ever-increasing amounts of information on us. And as anyone familiar with the academic pissing contest that is Google Scholar will know, the megacorporation also goes to some length to make sure that one’s back catalog of scholarly writings is ‘unforgettable’.

When these individual collections of personal memories and activities are noted alongside Alphabet’s vast digital store of world culture and heritage, the extent to which Alphabet can influence the writing and creation of social histories becomes clear. Whilst historians worldwide can currently access a great deal of information through the megacorporation’s various platforms, Alphabet itself can play the role of historian too. Given its expertise in information storage and machine learning, Alphabet is in a prime position from which to conduct macro level, cross-cultural, historical analyses. And as the megacorporation arguably has a better understanding of what retains attention than most (through its tracking of YouTube viewing practices for example), it seems uniquely capable of presenting such historical analyses in ways that prove captivating to a wide-ranging audience. 

In short, Alphabet’s influence over how we live, and how we make sense of, the past and the future, results in it being uniquely deserving – amongst contemporary firms – of the megacorporate label. In all likelihood, and for good or bad, this influence will continue for some years to come. As a result, people in general, and business and society scholars in particular, are well advised to further consider the profound ways in which it shapes existential concerns worldwide.

About the Author

Glen Whelan’s book, Megacorporation: The Infinite Times of Alphabet, is out now through Cambridge University Press. He sometimes teaches at McGill, and researches the moral, political and social influence of corporations, amongst other things. He is on twitter @grwhelan.

Photo source: chrome unboxed

Remote research: A story about “being there”

By Elizabeth Cooper

◦ 2 min read ◦

It has now been more than a year since researchers have been forced to move most of their data collection online and, where this has not been possible, to cancel it completely. Doing research remotely has revealed some benefits: it is much cheaper, it is better for the environment, and it usually saves time, to name just a few. So, why should we go back to the “field” when this is all over? The following is a story about the importance of ‘being there’ – and about how the things that go wrong can indirectly lead to better quality research.

The settlement of Kulusuk is home to about 200 people and is located on a small island off the eastern coast of Greenland. As I touch down in a helicopter, I can see nothing but empty and dull terrain – different shades of brown rock contrasted against the electric blue sea, which glitters with the even brighter white of scattered icebergs floating endlessly into the distance.

The year is 2017 – summer, although the untrained eye wouldn’t guess so, judging by the snow-covered mountains drawn sharply on the horizon. I have been travelling around Greenland for a few weeks now, and my task is to interview tourists about their experiences in the country, as part of a market research project for Greenland’s national tourism board. 

The problem with interviewing tourists in one of the most remote places in the world, however, is that there aren’t that many. This is a problem I have been dealing with throughout my travels, but one that is markedly more pronounced here on the east coast. There simply aren’t that many tourists who have the perfect combination of sufficient wealth and excess adventurous spirit that it takes to travel to Greenland, and most of those who do, head to the more accessible and well-equipped towns on the west coast. Here in the east, things feel incredibly…local. It’s an atmosphere that simultaneously excites me and fills me with panic about how on earth I will secure enough interviews to make my research statistically valid.

I drop my bags off at the town’s only hotel and start preparing for the twenty minute walk into the settlement itself, where I’ve heard there is a museum – and perhaps the chance to bump into a tourist or two. However, as I begin to march determined out of the door, a member of the hotel staff blocks me. She tells me that there is a “piteraq” on its way, and although I have no idea what a piteraq is, her expression in itself is grave enough to stop me in my tracks and make me step back into the warmth for an explanation. 

The Greenlandic word “piteraq” literally translates to “the thing that attacks you”, and refers to a cold and incredibly fierce wind that originates on the polar ice cap and sweeps down the east coast. With wind speeds that are usually comparable to a category 1 or 2 hurricane, these storms effectively cut off the island for days on end, as flying in or out, or sailing anywhere, is made impossible. 

Overcome by renewed frustration about the feasibility of my research, I head upstairs to the hotel restaurant, where the first stages of the piteraq are already playing out on its huge, panoramic windows – spatters of tiny raindrops are gathering on the glass, accompanied in surround sound by the occasional distant roar of wind gusts picking up momentum. To my surprise, the restaurant is full. As I soon learn, these are tourists who were supposed to be passing through, but who have now become stranded due to the weather. Grabbing a plate at the buffet, I sit down with an Austrian family who invite me to play cards with them.  

Over the next two days, I don’t go anywhere – and neither do the tourists. We are imprisoned by the storm, and for lack of anything better to do, my fellow inmates are happy to engage me. I move from table to table, drinking coffee after coffee, and then wine after wine, with all of the other characters who have found themselves at this point in the world at this point in time. I hear stories from the British man who accidentally left all of his luggage (including his phone and wallet) on the tarmac at Reykjavik airport, and, upon arrival in Greenland, knocked on the nearest front door, told the family who lived there his story, and was taken in by them for three days; the elderly Canadian woman who had been dreaming about visiting Greenland since she was 14, when she saw a picture of a Greenlandic Inuit woman who, to her, “exuded happiness”; the two skittish French ladies who mistook a sled dog for a polar bear and sent the whole town into emergency response mode for no reason. 

The skies after a piteraq are some of the bluest and clearest skies you will ever see in Greenland – it’s like going to sleep in black and white and waking up in colour. Mother Nature’s twisted sense of humour, I conclude, as I finally head to the airport, with a folder full of interview notes, a deeper connection to my research environment, and a newfound appreciation for going with the flow.

About the Author

Elizabeth Cooper is a PhD Fellow at Copenhagen Business School, within the Department of Management, Society and Communication. Her research aims to link the fields of behavioural science and tourism, by experimenting with strategies to ‘nudge’ cruise tourists into behaving in more sustainable ways, specifically in the ports of Greenland.

Impact of COVID-19 on mortality inequalities: The case of France

By Clément Brébion

◦ 3 min read ◦

Despite an unprecedented worldwide decline in mortality over the last century, a substantial income gradient in life expectancy persists within most countries. In the US for instance, the 1% richest men have a life expectancy at the age of 40 that is 15 years larger than the poorest 1% (difference of 10 years for women) and this spread is currently increasing. In France (on which this blog post is based), the income gradient is of a similar size despite a more egalitarian access to health care.

Pandemics likely amplify this spread because they reveal latent inequalities in individual health capital and because they spread differently across living environments. Our recent study reveals that the COVID-19 crisis, which epitomizes such massive mortality shock on a worldwide scale, is not an outlier in this respect.

A few definitions

We analyse the impact of COVID-19 on mortality inequalities over the whole year 2020 in France, one of the most severely hit country in the world. We use comprehensive registered data, allowing us to study the evolution of mortality as well as the income level of each municipality of metropolitan France. Given the unreliability of public data on deaths attributed to COVID, we focus on excess mortality occurring in each municipality, defined as the deviation in 2020 all-cause mortality with respect to the average of 2019 and 2018. The link between poverty and morality related to the epidemic is thus analysed by comparing excess mortality between ‘rich’ and ‘poor’ municipalities, where ‘poor’ is defined as belonging to the poorest 25% of municipalities (‘Q1’ hereafter).

Two waves that have affected more the poor municipalities 

Figure 1 below shows that, as in many European countries in 2020, France has been hit by two distinct waves that peaked in April (17,000 extra-deaths) and November (15,100 deaths), respectively. Each time, a lockdown was implemented at the national level to reduce the spread of the disease (March, 17 to May, 11 & October 30 to December 15). The first lockdown was the most stringent and has seemingly worked best to reduce casualties to COVID-19.

Figure 1: The figure represents the difference between the monthly number of deaths in 2020 and its average over 2019 and 2018 in France

Figure 2 shows the distribution of excess mortality across municipalities according to their income. Each month, the figure shows the average number of abnormal deaths that occurred since the beginning of the year in each group of municipalities (per 10k. inhabitants). While no specific pattern can be seen over the first three months of 2020, a marked difference between the two groups of municipalities appears in April (wave 1), that further grows as the second wave takes place (October-December). 

In-depth analyses tell us that excess mortality in poor municipalities was 30% larger than in non-poor municipalities in 2020 (2.6 more extra-deaths per 10k. inhabitants). Our research shows that this spread directly relates to COVID-19 and is not explained by differences in the geographical localisation, in the share of old-age inhabitants or in the life conditions under the lockdown between rich and poor municipalities.

Figure 2: The graph plots the cumulative sum of all excess deaths per 10,000 inhabitants from January 2020 for poor and non-poor municipalities in French urban areas.

The fact that the income gradient uncovered during the first wave is not compensated during the second wave, but rather reappears with regularity every time the epidemic returns must be emphasized. One can indeed show that the income gradient is the strongest in areas that got most affected by COVID-19 in 2020. If further epidemic waves occurred – and some signs suggest that it has already started in France as well as in several other countries – our result suggest that, once again, the poorest municipalities will suffer greater losses.

Worse housing conditions and higher exposure through employment

What are the main differences between poor and non-poor municipalities that explain the income gradient in Covid-19 mortality? Our analysis highlights the key mediating role of labour market and housing conditions, in line with the idea that local factors are important determinants of the spread of epidemics. More specifically, the larger share of essential workers and of overcrowding housing almost fully explain the income gradient in COVID-19 related mortality. Interestingly, labor-market exposure remains an important determinant of COVID-19 mortality across both waves, while the role of housing conditions decreases over time, probably because the second lockdown was less stringent. 

Our work shows that the current health crisis amplifies already existing socio-economic inequalities. It also suggests that public policies aiming at limiting its effects should primarily focus on the poorest municipalities, notably by protecting workers as much as possible in the short term and by improving housing conditions in the medium term.

References

Brandily, P., Brébion, C., Briole, S., & Khoury, L. (2021). “A Poorly Understood Disease? The Impact of COVID-19 on the Income Gradient in Mortality over the Course of the Pandemic” , Working Paper, n° 2020-44, Paris School of Economics.

About the Author

Clément Brébion joined CBS in September 2020 as a postdoctoral researcher.  He received his PhD in economics in November 2019 from the Paris School of Economics. His main research interests are labour economics, economics of education and industrial relations. He has a particular interest into comparative research. More recently, he started working on the EU H2020 project HECAT that aims at developing and piloting an ethical algorithm and platform for use by PES and jobseekers.

March for Gender #4: Leaving no one behind

By Maria Figueroa

◦ 3 min read ◦

To mark International Women’s Day 2021, the University of Bath’s Business and Society blog and Copenhagen Business School’s Business of Society blog have teamed up to present March for Gender. This month we will explore research focusing on gender, or research findings that have specific implications for women.

In our final piece of the month Maria Figueroa looks beyond gender, and explains how business education and research can create a fully inclusive society that leaves no one behind.

The ethos of the Sustainable Development Goals (SDGs) is that society should be inclusive, environmentally just and enabling economic prosperity leaving no one behind. Business knowledge, education and research in these areas keep however advancing in separated disciplines, often directing the focus of attention to partial responses that may contribute to perpetuate conditions that leave people behind. Cohesion in achieving the SDGs goal of leaving no one behind cannot rely in adapting sameness of solutions. It requires attending to societal differences and facilitating the multiplication of ideas, creativity and forms of collective action and knowledge production and dissemination.

There is a critical role for research and education to help deepen the inquiry of what it takes to leave no one behind particularly a key role in business education.  

The ethos of business education and research for sustainability is to prepare private actors, investors, new business models, organizations and institutional actors in finding ways of addressing SDGs. In the selection and adoption of seventeen development goals of 2015 involvement of a great array of societal actors, from national governments to business representatives, big corporations and civil society organizations was ensured. The resulting agenda for action made emphasis to acknowledge the central role in achieving SDGs to be played by private actors, private finance, and businesses in forms of public private partnerships.

However, more than five years later, only marginal changes are tangible within business school education and research and a weak articulation of the bold SDG agenda for change.

Besides individual courses and occasional initiatives, no major overhaul or programmatic educational shift effort within or across departments has challenge the operation and scope of business education. 

A common approach in universities and business schools has been identification of how many SDGs goals are being targeted in their scope of education and current action, and reporting on these as evidence of engagement with SDGs. A similar approach serves to help businesses and public actors learn and report on what they are already doing to engage with SDGs. This together with helping business explore effective reactive stances to avoid societal or environmental crisis or challenges emerging.  These two common approaches to business research and education make no clear inroad for how business and private actors can contribute to leaving no one behind. 

The ethos of civil society is to generate voices and manifestations that reveal the extent of economic, social and environmental discontent, lack of improvement and unjust conditions and of articulating demands for action and changes at all levels. Recent events have elevated voices in movements such as Black Lives Matter, Me Too, Fridays-for-the-Future, Extinction Rebellion, Indigenous communities and other organized voices in society ranging from extreme right movements to nature representatives organizing other than human voices (forest, soil, pollinators, biodiversity).

The complexity of the current climate and environmental challenges and increasing volume and presence of these voices cannot be dismissed in business education and research, or handled in separated efforts as matter of concern only to businesses operating in international or developing regions and localities.

Leaving no one behind requires engaging in knowledge production that gives attention to all forms of engagement in business and societal interactions. This attention should facilitate changes in education that to produce exceptional novelty and innovation and to nurture a potential to advance knowledge of practical and academic high quality, education that is capable of setting new frontier research bringing in systemic interactions within a variety of academic disciplines and ensuring practical and transformative business knowledge with a holistic and environmentally just take toward sustainability transition. 

Business schools are posed to advance breakthrough knowledge to meet the “leave no one behind” goal, tackling several areas from the production and service processes transparency specifically in value creation, to emphasising sustainability and environmental justice through the company’s technological advancements and presenting sustainable values, mission and vision.

Furthermore, business education need incorporating appraisal of systemic change associated with challenging processes and their ecological and social impact and behavior change. With the capability to increase the value for the environment, participation of nature in business innovations, the understanding of what enhances people’s agency, what provision safe wards participation, and improves cooperation and what helps to unleash individuals vitality and imagination and can contribute to co-create new market niches and business opportunities. 

Maria Figueroa is an Associate Professor in Sustainability Management at the Department of Management Society and Communication at Copenhagen Business School.  Her research intersects scholarship from urban sustainability science, comparative international politics of climate mitigation, innovation, and partnerships for sustainable development. She focuses on the assessments of drivers, trends and challenges of low carbon transitions and sustainable development. 

SFDR, NFRD and the EU Taxonomy – What is their relationship?

By Andreas Rasche

◦ 5 min read ◦

The new Sustainable Finance Disclosure Regulation (SFDR) is on the minds of many investors these days. While a lot has been written on SFDR itself, I discuss how it relates to the Non-Financial Reporting Directive (NFRD) and the EU Taxonomy on sustainable economic activities. Taken together, these regulations can be overwhelming and maybe even confusing. While this is not the right place to comprehensively discuss all three regulations, I make some clarifications on their interlinked nature. 

SFDR, NFRD, and the EU Taxonomy – What are we Talking About? 

To start with, let us briefly review the three legal instruments, all of which belong to a series of EU regulations under the EU Action Plan on Sustainable Finance.

  • NFRD is the EU legal framework for regulating the disclosure of non-financial information by corporations. It was adopted in 2014 and states that corporations have to report on ESG information from 2018 onwards (for the 2017 financial year). NFRD is rather flexible – it applies only to so-called “public interest entities” (basically rather big corporations) and it contains so-called comply-or-explain clauses (allowing for non-disclosure of information if this is made transparent and reasons are given). 
  • SFDR is the new EU regulation that introduces rules for financial market participants (FMPs) and financial advisers (FAs) to report on how they account for sustainability risks. SFDR applies at the “entity level” (i.e. requiring financial firms to report on how the whole organization deals with such risks) and also on the “product level” (i.e. requiring firms to report on how their financial products are affected by such risks). SFDR contains few comply-or-explain clauses (e.g., smaller firms, with less than 500 employees, can opt out of reporting on due diligence processes). The regulation asks all FMPs and FAs to report on sustainability risks even if they do not offer ESG-related products. If an entity offers ESG-related products, SFDR requires additional disclosures depending on how “green” the product is considered to be. SFDR came into force on 10 March 2021. 
  • The EU Taxonomy regulation (hereafter: the Taxonomy), which entered into force 12 July 2020, reflects a common European classification system for environmentally sustainable activities. Basically, the Taxonomy tried to answer the question: What can be considered an environmentally sustainable activity? Answering this question is essential for investors to prevent “greenwashing” – i.e. a situation in which financial products are marketed as being sustainable without meeting sustainability criteria. The taxonomy defines six environmental objectives, and it defines an economic activity as sustainable if this activity contributes at least two one of these objectives without, at the same time, doing significant harm to any of the other objectives. 
Differences and Commonalities 

To start with, it is important to note the different legal status of SFDR/the Taxonomy as well as NFRD. NFRD is based on an older EU Directive (2014/95/EU). Directives imply that EU member states have to translate the broad requirements into national regulation. By contrast, SFDR (2019/2088) and the Taxonomy (2020/852) are both based on European regulation, which is immediately enforceable and does not require transposition into national law. 

To understand how the three legal frameworks relate to each other, look at the Figure below. NFRD applies to corporations of all kinds. Hence, for investors NFRD is mostly relevant because it stipulates how investee companies report ESG data. SFDR, by contrast, most concerns financial market actors and ensures transparency about how these report on sustainability risks to their audiences (e.g., retail investors). The Taxonomy was introduced to have a common reference point when trying to figure out whether an economic activity really is sustainable. The Taxonomy therefore has the power to further specify the regulations set out in SFDR and NFRD. 

source: Andreas Rasche
Emerging Relationships  

The linkages between the three frameworks will be further specified throughout the coming years. While SFDR has been in force since 10 March 2021, it is only in the so-called “level 1 stage of development”. As with many EU regulations, level 1 development sets out the basic framework principles for a regulation, however without specifying technical details. SFDR level 2 will come into force once the regulation is complemented with Regulatory Technical Standards (RTS), which are developed right now. The RTS will also specify the linkages to the Taxonomy in more detail (e.g., related to the “do-no-significant-harm” concept inherent in SFDR). 

So, what can we say right now? The current versions of SFDR and NFRD do not yet link disclosures to the Taxonomy. This is likely to change, especially with the SFDR RTS being further specified and rolled out (in early February the European Supervisory Authorities released their final draft of the SFDR RTS). Moreover, the NFRD regulation is currently under consultation and will be revised in the near future. However, two important linkages are important to consider right now.  

  • First, the scope of the Taxonomy is defined through NFRD and SFDR. In other words, if an organization is affected by NFRD and/or SFDR, the Taxonomy will also be relevant for its disclosure practices. It is important to note here that the EU Taxonomy defines further mandatory disclosures in addition to what is laid out by NFRD and SFDR. 
  • Second, the Taxonomy asks companies (incl. asset managers) to report the percentage of their turnover and capital as well as operational expenditures that are aligned with the Taxonomy. It also asks asset managers to report the percentage of their portfolio which is invested in economic activities that are aligned with the Taxonomy. 
The Future

We will witness a good deal of technical specifications of all three regulations throughout the next years. SFDR level 2 reporting will kick in once the RTS standards are part of the reporting (probably by mid-2023); also by 2024 year-on-year comparisons of data points under SFDR will be likely mandatory. The six environmental objectives of the Taxonomy will be specified through technical screening criteria, some of which will be released very soon. 

It is good to see non-financial reporting and sustainable finance being backed by strong European regulations. It allows for more comparison and benchmarking and hence transparency. But, of course, we should also be prepared for a good deal of clarifications that will be necessary until institutionalized reporting cycles can fully kick in and unfold their potential. 

About the Author

Andreas Rasche is Professor of Business in Society at the Copenhagen Business School (CBS) Centre for Sustainability. His latest book “Sustainable Investing: A Path to a New Horizon” (with Georg Kell and Herman Bril) was published recently. Email: ar.msc@cbs.dk Homepage: www.arasche.com

March for Gender #3: We need a manifesto for Maya, not just a celebration of John

By Pierre McDonagh and Andrea Prothero

◦ 5 min read ◦

To mark International Women’s Day 2021, the University of Bath’s Business and Society blog and Copenhagen Business School’s Business of Society blog have teamed up to present March for Gender. This month we will explore research focusing on gender, or research findings that have specific implications for women.

Here Pierre McDonagh and Andrea Prothero call out gender discrimination in the marketing academy. Their latest study, looking at gender representation in marketing’s academic journals, showed that women were significantly underrepresented on editorial boards, and that special issues and awards favour men over women. They use these disappointing findings to call for meaningful change, outlining how the problem could be addressed.

Despite the progress made in recent years, gender inequality persists in all walks of life. In our workplaces, the statistics are especially troubling. In 2020, men earned 15.5% more than women for the same work. As of 2019, only 7% of FTSE 100 companies had a female CEO.

Discrimination also comes in less easily measurable ways, and many women feel that their work is not taken as seriously as their male counterparts or that their gender has caused them to lose out on a promotion.

Wake up! It’s 2021!

We decided to explore this important issue in our latest paper in the Journal of Marketing Management. We looked at gender representation in marketing’s academic journals, through three key areas – the gender composition of editorial boards, special issue celebrations and the awards process. This study is a continuation of a larger research project which examines ‘the development of feminist thought within marketing scholarship from 1993 to 2020’.

Our results painted a disappointing picture. It’s a sad indictment of our field that in 2021 the facts are as stark as they are. So, we think it’s important to pause at this point in the process, to empirically call out one major issue – gender discrimination within our academy.

We wrote about this as we believe many scholars might not realise what is happening in our academy and, as our recent paper suggests ‘it’s hard to be what you cannot see’!

Our goal is to get scholars in the marketing academy to think differently about things that are hidden in plain sight. We also want them to join us in asking for meaningful change with respect to existing gender discrimination in the marketing academy.

A sad indictment of the field

For this study, we examined the gender composition of 20 leading journals [i], considering Editor-in-Chief, Co-Editor, Advisory Board, Associate Editor and Editorial Review Board positions within the journals. We found that, while there has been improvement since 2017, nonetheless in 2020 over two-thirds of the editorial board positions within leading journals in the marketing academy are held by men.

At the same time our research highlighted how journal celebrations also favour men. Special issues for example include reflections from previous editors (who are mostly men), and invited commentaries (who are mostly men). And, where journals and/or their related associations celebrate outstanding research through awards processes, those awards which are named after leading figures in the field are all named after men! We are not arguing that women are deliberately excluded from celebrations, but that there are structural, systemic and institutional biases at play, which means male colleagues are privileged over women. And this of course, also means that injustice and inequality for female academics are perpetuated.

Addressing the problem

How then can the marketing academy and the publishing houses which publish our research help rectify this sad state of affairs? First of all, we can all ask our journal editors and gatekeepers in the Academy to act now. Specifically, we are asking journal editors and publishing houses to review their activities, and we offer here 4 simple steps to tackle gender discrimination specifically, and inclusion and diversity more broadly, in the marketing academy:

  1. Build diversity into existing journal review boards which extends across the globe. Cry out for each Editor-in-Chief to publish a statement for their journal making clear ‘why’ its gender and race composition is the way it is. Ask that they embrace the principles of unity & diversity. Editors-In-Chief are well positioned to lead the charge moving forward.
  2. Introduce a quota system to ensure diversity of people involved in journals from advisory boards, manuscript review boards, Associate Editors, Co-editors, to the Editors-In-Chief.
  3. We should ask awkward questions of the leaders in our field. Why do the majority of named awards in our field honour white men? We request awards which also honour the leading people of colour and females in our field. Quite simply the current status quo is an injustice – not everyone is a white male academic, so why do they dominate everything!?
  4. Celebrations – Our Editors-in-Chief can shape the field by celebrating those who remain invisible within our field. We have female role models for younger scholars to inspire them to greatness, but they are not celebrated or included either in editorial boards or in special issue celebrations to the same extent as men. Let’s rectify this.

Can we please bring the marketing academy up to speed in the year 2021? Let’s not procrastinate here or leave it to DC or Marvel fantasy movies to inspire change, let’s do it ourselves.

We know Rome wasn’t built in a day and change takes time, but we’ve heard all the clichés before – we are fed up, we are here, and we want to be listened to. Our marketing academy should reflect the values we cherish and those we wish our students to emulate. For too long the marketing academy has favoured one gender (and one race) and as a result, women have been pushed to the periphery of the wider academy.

Change, not tokenism

What’s more we want fundamental change, not tokenism.

We need an intersectional approach now more than ever; this recognises issues of race and gender, alongside other examples of subordination such as appearance, class, religion, sexuality and ability which are not independent of each other.

We need what Marian Wright Edelman (founder of the Children’s Defense Fund and civil rights activist) calls a global sense of connection – where everyone can be seen, and all voices are heard and rewarded, whether by being invited to contribute to special issues celebrating our journals or by membership of our editorial boards! We deserve ‘marketing joy’ to underscore what we have in common with others in a multiracial, multicultural, democratic society.

This is important, not only in providing role models for aspiring academics who are not solely “pale, male and stale”, as well as providing equal opportunities in terms of key indicators of esteem within our academy, but also in terms of harnessing what gets published in our journals. In 2021 it is simply not acceptable that 88% of advisory board members within our journals are men or that some journals in our field have never had a female Editor-in-Chief. When publishing houses claim on their websites to be fully committed to inclusion and diversity in their journals, we also need this to shine through within our journals. In the marketing academy, while there has been improvement in recent years, gender representation is still appalling.

We call on those who can to change this. We need parity. Now.

References

[i] Journal of Consumer Psychology, Journal of Consumer Research, Journal of Marketing, Journal of Marketing Research, Marketing Science, Journal of the Academy of Marketing Science, Journal of Retailing, International Journal of Research in Marketing, European Journal of Marketing, Industrial Marketing Management, International Marketing Review, Journal of Advertising, Journal of Advertising Research, Journal of Interactive Marketing, Journal of International Marketing, Journal of Public Policy and Marketing, Marketing Letters, Marketing Theory, Psychology and Marketing, Quantitative Marketing and Economics.

About the Authors

Andrea Prothero is Professor of Business and Society at University College Dublin, Ireland, and Co- Director of the UCD Centre for Business and Society (CeBaS). Her research broadly explores the area of Marketing in Society with a key focus on sustainability and gender issues.

Pierre McDonagh is Professor of Critical Marketing & Society at the School of Management, University of Bath, UK. Pierre has researched sustainable consumption & production since the early 1990’s and helps people understand what sustainable communication entails. He also writes about issues in gender equality in marketing and the benefits and challenges of critical marketing communications. He recently co-authored ‘The Dark Side of Marketing Communications’ with Tim Hill, which features as part of the Routledge series on Studies in Critical Marketing.

Arguing for Climate Adaptation

By Stella Whittaker

◦ 3 min read ◦

This month saw the publication of the Climate Policy Initiative’s (CPI) long awaited analysis of climate finance flows in cities.  Each year the CPI publish an analysis of the global landscape for climate finance but this year that work was supplemented by this urban analysis.  There will also be another forthcoming CPI report  due in April 2021 – State of Cities Climate Finance Report which will help paint the full picture.  

Cities and urban communities across the globe are highly vulnerable to climate change – heat waves, extreme weather volatility, floods, droughts, coastal inundation, and vector borne diseases. The Carbon Disclosure Project (CDP) data indicates that in 2018, 85% of cities reported major climate-related disruptions, including flash and surface flooding and extreme weather events like heat waves and droughts.

There is an urgency for much more discussion, research and attention on climate finance to address climate adaptation needs in cities. While many cities have begun planning policies and programs to build resilience towards climate hazards, the how and where of finance for those activities is less understood.  

It is plain to see from this practitioner-based work that climate finance for adaptation is not being supplied or demanded at a scale that is commensurate with the size of the impacts of climate change.  Scholars have found that here are significant data and reporting challenges and a myriad of policy challenges and barriers.  I am stressing here the need to argue loud and long for adaptation along with mitigation activities.

CPI recorded annual global climate finance flows of USD 546 billion in 2018. Of this only 4% can be attributed to adaptation. Finance flow in cities for adaptation is particularly problematic. The CPI also found:

Between 2010 and 2014, cities received less than 5% (in the range of USD 109 Million) of global adaptation finance.

Morgan Richmond, Nidhi Upadhyaya and Angela Ortega Pastor, CPI, 2021

So, based on current estimates, despite all the difficulties with measurement and tracking, potentially less than 1% of global climate finance is flowing to cities each year for adaptation, which is much less than the USD 11-20 billion that what the World Resources Institute (WRI) stated be needed on an annual basis to protect global urban infrastructure from climate risks (WRI, 2019).

This month I launched a new Linkedin Group Adaptation Finance – this is a discussion, research and professional development group for investors, governments and academics alike dedicated to developing an understanding of climate finance for adaptation. By following the Group there is an opportunity to participate in my PhD climate finance research (survey, interview, focus group or information provision), whilst learning and sharing in the latest research and trends from various industries. As climate adaptation practitioners, investors, governments, academics, scientists and researchers we rarely meet to share knowledge and experiences, please join in this unique collaboration. I want to build an active research environment for both investors and city government focused on climate adaptation. 

In addition, in the Group:

  • WE will analyse climate finance flows in cities.
  • WE will also analyse activity against internationally recognized benchmarks for appropriate urban climate change adaptation financing. 
  • WE will collate innovative climate finance practice.
  • WE will generate new knowledge on how to deliver and finance large-scale innovative city financing solutions through public and/or private stakeholders. 

In Arguing for Adaptation there are five practical things to think about in getting the balance right:

  1. Make climate adaptation an equal priority to climate mitigation
  2. Understand future climate risks to your business and/or constituency (look at the guidance from the Taskforce on Climate-Related Financial Disclosures (TCFD)
  3. Understand climate finance flows in your city and region(s) you operate in
  4. Enter into a dialogue with investors and cities to understand each other’s challenges and opportunities
  5. Look for and prioritize climate initiatives that deliver dual or even multiple benefits – climate resilience, mitigation, natural capital etc. such as nature-based solutions NbS

If you like a good cause and a good argument, then please join me. 

About the Author

Stella Whittaker is a PhD Research Fellow who is undertaking a PhD in climate finance at Copenhagen Business School, at the department of Management, Culture & Communications. Stella is a specialist in the field of sustainability, circular economy and climate change. She has worked for over 30 years as a senior executive in sustainability, climate change, infrastructure sustainability & environment.

March for Gender #2: The Gendered Impact of Covid-19

By Maha Rafi Atal

◦ 5 min read ◦

Most years, International Women’s Day is greeted by articles highlighting both progress made towards gender equality, and the distance still to close. 2021 is different. This year, organizations from the European Parliament to UN Women have instead drawn attention to how women have been pushed backwards – economically and politically – during the coronavirus. It has been “a disaster for feminism,”and a “great amplifier” which has exacerbated existing inequalities and unraveled tenuous gains. What does the research show?

First, the global economic contraction of the past year has disproportionately harmed women. In the United States alone, more than 2 million women have dropped out of the labor force altogether, a regression to 1988 participation levels, erasing a generation of gains. 

Globally, women account for 54% of jobs lost during the pandemic, even though they make up only 39% of the global formal workforce.

Women bore the brunt of job losses in 17 of the 24 member-states of the OECD in 2020, and in South Africa, a survey found that two-thirds of workers laid off or furloughed in the first wave of the pandemic were women.

In part, this is a reflection of the sectors women work in, such as travel, tourism, restaurants, and food production, which have been largely shut down over the past year.

Women are also more likely to be employed on precarious or zero-hours contracts within these sectors, which made them vulnerable to job cuts, or in informal roles which left them outside the reach of government income-support schemes.

Finally, 190 million women work in global supply chains, including garments and food processing, and these industries have contracted as buyers either withdrew orders from suppliers during the recession, or sought to re-shore production closer to home. Labor market dynamics also mean women who stayed in work are among the most exposed to contracting the virus itself. A majority – estimates range from 67 to 76 percent – of the global health care workforce are women.

Yet only one quarter of the gendered discrepancy in job losses can be explained by the sectors where women are employed. Far more significant is the burden of care labor, both paid and unpaid, which disproportionately falls on women in both developed and developing countries. 

Working mothers in the United Kingdom, for example, are 50% more likely than fathers to have either lost their jobs or quit in order to accommodate the responsibilities of caring for children with schools closed, with European women doing on average twice as much care labor as men during this period.

Over a million women in Japan left the job market in the first wave of the pandemic due to childcare needs at home, erasing tenuous progress the country had made towards workplace gender equality in the last decade. This unequal weight of the pandemic builds on pre-existing inequalities, as women are lower earners in many societies, meaning their jobs are considered a lower priority – by both employers and households – in times of crisis.

This economic crisis is not just a blow to women’s economic position, but to their political freedom. The “Local Diaries” podcast in India recounts the stories of women whose personal, political and sexual freedoms have evaporated as they have been locked down at home. As in pandemics past, covid-19 has seen a significant spike in domestic violence, femicide and other gender-bases violence in countries under lockdown. These include including developing countries like Nigeria, Argentina, Brazil, India, Pakistan, and China, and developed countries including the United States, the United Kingdom, France, Ireland, Lithuania, Sweden and Italy, a reminder that the home is not a safe place for many women. UN Women has referred to these spikes in violence as the “shadow pandemic.” 

Moreover, despite early warnings from international organizations and women’s rights advocates, many countries shut down or diverted resources away from reproductive health care during the pandemic, leading to a rise in maternal deaths, unsafe abortions and pregnancy-related deaths. Finally, lockdowns themselves – and the expansion of policing and military powers associated with their enforcement – can themselves pose a risk to women, as police forces can themselves be significant perpetrators of violence against women, and as governments take advantage of these powers to suppress political organizing, including feminist organizing, as seen recently in both the UK and Poland.

At the same time, in a punishing political environment, women and feminist organizations have been at the forefront of pandemic response. The Chilean feminist movement has released a useful guide for governments and employers for responding to the pandemic in a gender-just way, while the Indian Kudumbashree women’s collective organized grassroots community kitchens and takeaway restaurants to provide food and employment to women, especially migrant women, during the country’s shut down, and repurposed textile micro-enterprises, largely women-owned, for the manufacture of PPE.

Despite calls from international experts for governments to respond directly to the crisis facing women by keeping services for reproductive health or shelters for victims of gender-based violence open, targeting cash transfers to women in informal employment and providing for paid child care, UNDP reports that only 12% of governments have adopted adequate gender-sensitive measures in their pandemic response.

Meanwhile, employers who have disproportionately laid off women in the crisis now report that gender equity will take a backseat to restoring their financial sustainability as the pandemic ends. This is made more difficult by the fact that some governments, such as the UK, have suspended requirements for companies to report on their gender pay gap or comply with other equality requirements, as part of pandemic support.

In our own research on corporate responses to covid-19, we found brands advertising luxury fashion goods to women and presenting the pandemic lockdowns as a welcome relief from labor in which women could enjoy them, a regressive image that shows how women’s work is still seen as frivolous and extraneous.

This International Women’s Day, then, we must reflect not on what progress we have made or can make, but on how women, internationally, can recover what we have lost.

About the Author

Maha Rafi Atal is a postdoctoral research fellow at the Copenhagen Business School, where her research focuses on corporate power, corporate social responsibility and corporate influence in the media. She is a co- Investigator on the Commodifying Compassion research project. http://www.maha-rafi-atal.com

Photo by Giacomo Ferroni on Unsplash

Distraction and manipulation: the two horsemen of the digital economy

By Jan Michael Bauer

◦ 2 min read ◦

Even before COVID, people have spent more and more time online. Particularly mobile devices have become a large part of our daily routines and for many there are few moments when the phone is not within direct reach. While studies have shown that even teenagers think they waste too much time online, surprisingly little is done to stop this trend. 

But how did we get here? Several dovetailing factors enabled this development and give me little hope that this trend will slow down any time soon. While technological advancements in mobile internet and device components were necessary conditions that allow for an easy and enjoyable interaction with platforms and services at all times and places, the real champions of compulsive internet use are social and data scientists driven by monetary incentives and unrestrained by a lack of proper ethics training. 

Despite the frequent regrets about the many hours wasted on the internet, people are struggling with self-regulation and apps, like “RescueTime”, with to sole purpose to block oneself from using other apps are becoming increasingly popular. 

While internet addiction has not been officially recognized as a disorder by the WHO, close parallels can be drawn to officially acknowledge gaming and gambling addictions. 

And this is certainly no coincidence as tech companies hire psychologists and designers to make their products and services as tempting as possible, frequently borrowing elements from the gambling industry. However, even though some tweaks based on the knowledge of capable social scientists will increase user engagement, much more can be learned about consumer behavior and how to manipulate it through the application of the scientific method itself. The use of experimentation, collection of big user data and application of machine learning algorithms are the big guns in the fight for user attention and their money.  

All these efforts are used to make social media more “engaging” but ultimately sales and advertising campaigns more effective. To do so, user interfaces and features are explicitly designed to grab attention and contain what has been termed as “dark patterns”. Design elements that often tap into the subconscious decision-making processes and therefore manipulate user through purposefully curated interfaces. While such practices benefit the company, they can have detrimental effects on individuals and society as a whole. 

We know that individual choices reflect individual preferences only under certain conditions, including the absence of deceptive choice architecture or marketing messages. Hence, I can’t stop wondering about the opportunity costs and side-effects of these miraculous little devices in our pockets that have grown into an ugly hybrid between a snake oil salesman and one-armed bandit. 

We have free markets based on the belief that they create value for society and make people better off by efficiently satisfying their needs. The recent U.S. opioid scandal has shown that for some products, sellers’ profits might not be positively related to consumer value. It certainly gives me pause that the best offline equivalent to the “RescueTime” App is probably the Betty Ford Clinic.

We are faced with many pressing issues that would require our full attention, while people are increasingly plagued by credit card debt, the planet is suffering from overconsumption and we spent 30,000 years alone, watching Gangnam Style on YouTube. 

Regarding the larger point that any efforts against these trends would hurt innovation, jobs and growth; let us take one step back and point out that the Western world has made it an imperative to ensure individual property rights and outlaw the use of violence with the explicit goal to increase investment and productivity. People can just do more good stuff, when they do not have to spend time protecting their property and family. Given our current technology and knowledge from the behavioral sciences, I think we have seen enough and should start treating distraction and manipulation as similar threads to human flourishing. 

So, what could we do? In the short run, we need to find ways to reduce the stream of big data feeding these efforts, force these practices out in the open and raise awareness about their use and effects, and find effective regulation to limit manipulation efforts in a dynamic attention economy. In the long run, we probably need to go beyond those patches as these issues not only hurt individual lives and careers but also the fabric of our democracy. 

Further reading

We recently published a paper showing how users can be manipulated through dark patterns to provide more data:

J. M. Bauer, R. Bergstrøm, R. Foss-Madsen (2021) – Are you sure, you want a cookie? – The effects of choice architecture on users’ decisions about sharing private online data, Computers in Human Behavior.

About the Author

Jan Michael Bauer is Associate Professor at Copenhagen Business School and part of the Consumer & Behavioural Insights Group at CBS Sustainability. His research interests are in the fields of sustainability, consumer behavior and decision-making.

Source: photo by ROBIN WORRALL on Unsplash

March for Gender #1: How a feminist collective took on a media giant to challenge everyday sexism

By Sarah Glozer & Lauren McCarthy

◦ 4 min read ◦

To mark International Women’s Day 2021, the University of Bath’s Business and Society blog and Copenhagen Business School’s Business of Society blog have teamed up to present March for Gender. This month we will explore research focusing on gender, or research findings that have specific implications for women.

Here Sarah Glozer and Lauren McCarthy present their latest research into the activities of the feminist group ‘No More Page 3’. They explain why online activists should take a step back for campaigning in order to maintain the energy needed to affect change. This piece was originally published in The Conversation.

The daily image of a topless woman on page three of the Sun newspaper was considered by some to be a “British institution”. Yet it was also increasingly seen as a relic of institutionalised sexism in the media and society.

Then in 2015, nearly 50 years after it was first introduced, the feature was quietly removed from the publication. This decision was credited, in part, to the online campaign efforts of the “No More Page 3” (NMP3) movement, which gained the support of 140 members of parliament and numerous charities, including Women’s Aid and Girlguiding. It also attracted more than 240,000 petition signatures.

The campaign, which helped to force change at one of the UK’s most popular and powerful media companies, was widely acclaimed, described by one MP as a “seismic victory”. Activist Katherine Sladden wrote, “No other campaign has done as much to inspire a new generation of young feminists,” adding that it “became the gateway for women finding the courage to speak out on issues they care about”.

But beneath this success story lies a complex tale of how emotional energy sustained the NMP3 campaigners through personal and painful trolling.

Our research into the campaign reveals how supporters were met with online abuse on a daily basis. They regularly encountered rape and death threats aimed at themselves and their families. Campaign founder Lucy-Anne Holmes has told how she suffered an “overwhelming feeling of helplessness” and “burnout”, recalling:

It was terrifying. I was spent: financially, emotionally, creatively. Just going on Twitter with all of those voices coming at me would bring on a panic attack. I felt like I was being strangled by invisible hands.

Her experience was far from unique. For while the liberating potential of social media to mobilise collective action is widely valued, the toxic climate many experience on social media is all too familiar, and can lead to stress, anxiety and depression.

Yet the relentless online abuse aimed at the NMP3 campaigners – who deliberately tried to engage with their opponents through reasoned and polite posts – was tempered by messages of encouragement, both from each other and from supporters of their cause.

This complex interplay of positive and negative emotions led us to dig deeper into the campaigners’ survival story, and investigate the powerful techniques which kept them going in the face of such overwhelming adversity.

One important element was the underlying sense of solidarity which became a powerful force in helping the campaigners to recharge and replenish, sustaining momentum through emotional highs and lows. Faced with trolling and harassment, many campaigners felt energised simply by being online with other women with shared experiences. This feeling of alignment with others created a valuable store of emotional energy.

As one campaigner told us: “It wasn’t just a campaign … it was a space where we could go and feel completely confident, we could share anything with each other, and work out what we thought about things.”

Stepping back to move forward

Interestingly, this solidarity led to the coordinated and tactical use of a relay system adopted by the team. An exhausted campaigner wrestling with a hostile social media thread would “pass the baton” on to a colleague via a system of online messaging or “tagging” across platforms.

This system became a vital part of keeping the campaign’s momentum at times when some members felt the need to retreat from the front line. There was time and space for activists to step away from their screens, to disengage with the onslaught of social media.

Usually temporary, these moments of stepping away were deliberate and empowering – they offered protection. And in preserving individual wellbeing, they also ensured the continuation of the campaign.

Retreating, far from being seen as a form of weakness or defeat, was supported by the campaigners. It was a strategy which allowed for recovery of emotional energy and healing and, crucially, it rejuvenated the campaigners to return to campaigning.

A genuine connection to the roots of the campaign was also something that sustained the (mostly female) volunteers. They drew on their aligned personal experiences, often reminiscing about teenage shame they experienced related to their bodies or of later episodes of sexual harassment. The emotions related to these experiences meant the campaigners didn’t just “think” shame or anger, they felt it deeply.

One explained to us: “The feminist stuff still remains the thing that really lights me up.” She continued: “I feel it’s personal, it’s maternal, because I have a daughter, and a son who’s affected by toxic masculinity. It’s in my experience of abuse in relationship. I’m angry about it and passionate about it because it’s personal to me and people that I love.”

Another said: “Standing up for what is right is enough to make your legs go weak, your voice grow hoarse, and your hands shake with rage.”

Six years on from the NMP3 victory, more action is needed to fight inequality in both our online and offline worlds – there is still plenty to campaign for. Digital platforms certainly need to better police social media channels which continue to tolerate and excuse trolling and hate speech, particularly that directed towards women.

But we should be encouraged by NMP3’s story of grassroots collective strength, and its journey to success. And we should also consider the lessons it provides about activism and the common advice for women to always “lean in”. Sometimes, it seems, it’s better to simply retreat, replenish and come back stronger.

About the Authors

Dr Sarah Glozer is Associate Professor in Marketing and Society in the School of Management at the University of Bath. She obtained her PhD from the International Centre of Corporate Social Responsibility (ICCSR) at Nottingham University Business School. Sarah has also held a number of industry positions, such as Global Sustainability Manager at Cadbury Plc, UK. She is also Deputy Director of the Centre for Business, Organisations and Society (CBOS). Sarah researches and teaches on topics including corporate social responsibility (CSR) communication, digital marketing and ethical markets / consumption.

Dr Lauren McCarthy is Co-Director of the Centre for Research into Sustainability (CRIS) and a Senior Lecturer in Organisation Studies and Sustainability at Royal Holloway, University of London. Her research explores in what ways business can contribute to gender equality, with a focus on global supply chains. Lauren’s research has covered cocoa production in Ghana, cotton farming in India, and most recently, the effects of the COVID-19 pandemic on women garment workers in Cambodia. Equally, her research has explored how feminist social movements interact with business and CSR, particularly through the use of social media.

Photo by John Schnobrich on Unsplash

Portfolios at risk of Deforestation

How can financial investors better understand underlying risks and act accordingly

By Amanda Wildhaber, Dominik Wingeier, Jessica Brügger, Nico Meier, and Dr. Kristjan Jespersen

◦ 4 min read ◦

Forests play a crucial role in tackling climate change and protecting biodiversity. Around 12 million hectares of tropical forest worldwide were lost in 2018 and approximately 17% of the loss stem from the Amazon alone. The main drivers of deforestations are soy, palm oil, cattle and timber production. As deforestation may harm a company’s reputation, directly affect its supply chains and increase regulatory risks, many institutional investors are concerned about the impact deforestation can have on their portfolio companies.

How can deforestation be measured?

The definition of deforestation risk from an investor’s perspective is difficult to lock-in because different frameworks and approaches focus on different aspects of the risks. The amount of information and the lack of transparency can be overwhelming to financial investors. Therefore, a helpful framework for financial institutions to systematically evaluate the deforestation risk management of portfolio companies has been developed. The framework is divided into two parts, an internal assessment of a company’s commitments and achievements regarding deforestation and an external assessment of outside policies related to deforestation, namely binding laws and private sector initiatives. The framework may serve to complete a scorecard which gives an overview of how well prepared a specific portfolio company is and if it is able to deal with deforestation risks and future regulatory changes. The final scorecard reflects the deforestation risk of financial institution’s portfolio companies.

Is voluntary support sufficient?

Many companies voluntarily support sustainability initiatives and follow zero deforestation commitments (ZDCs) to signal their intention to reduce deforestation associated with the commodities in their supply chain. The reasons behind their commitments include demonstrating corporate social responsibility (CSR), reducing the risk of potential reputational harm and supply chain disruptions. To understand the value of these commitments in mitigating deforestation and associated risks, it is important to critically analyse them in terms of their scope, effectiveness, monitoring and achievements. This includes for example, assessing how companies define deforestation and whether they systematically measure the compliance with their commitments.

External pressure to facilitate internal commitments

It is valuable to see companies implementing robust internal policies and commitments to manage and monitor their deforestation risk. However, it is also important to have external policies in place to hold companies accountable. There are two types of external policies the proposed framework is based on.

  1. The first type are binding laws which apply for portfolio companies and thus represent a regulatory risk. The EU Timber Regulation (EUTR) of 2010, which prohibits the sale of illegally logged wood in the EU, is one example for such a binding law.
  2. The second type are initiatives by third parties, which are of a non-binding nature and complement the binding law. One such initiative is the Roundtable for Sustainable Palm Oil (RSPO), which is an initiative by private companies as well as external parties targeted to eliminate unsustainable palm oil production.
How do the companies score?

Based on the assessment of the two pillars of the framework – internal and external – a scorecard is derived which assists investors to better understand how a portfolio company or a new potential investment is managing its deforestation risk. Answering questions with scores from 1 to 3, whereby 1 is the best score and 3 the worst, the proposed scorecard allows the quantification of the deforestation risk management of a company. While the distinction between 1, 2 or 3 is not always straightforward, the final score gives a tangible assessment of how well a company is positioned to manage its deforestation risks and associated future regulatory changes. The following scorecard provides an overview of the assessment and indicates how well Nestlé is managing deforestation risks.

Having such a scorecard allows investors to manage and mitigate the deforestation risks they face in their portfolios. In addition, the final scorecard enables investment analysts to directly compare potential investments with other companies and can be used as a parameter in the investment process.

The call for action is getting louder

New regulatory requirements, growing public scrutiny and extended private sector initiatives (such as the investor-led initiative Climate Action 100+), mean that it is becoming increasingly important to properly manage deforestation risks. This is also becoming a key concern for financial investors and it is time to think about systematic approaches on how to include deforestation into the investment process. The proposed framework is intended to serve as a starting point for just that. It allows a quantification of deforestation risk and the identification of critical factors. Building the basis upon which investors can engage with companies. This is a first step to support the mitigating of not only financial but also ecological risks.

About the Authors

Amanda Wildhaber is completing her masters in Economics at the University of St. Gallen. She works as a Junior Consultant in the Strategy team of Implement Consulting. Her interest in ESG and sustainable investments developed when she wrote her bachelor thesis on social enterprises in India.

Dominik Wingeier is studying master’s in Banking and Finance at University of St. Gallen. Dominik has been working for BlackRock where he was responsible for executing and monitoring primary, secondary and direct investments in infrastructure projects.

Jessica Brügger is studying master’s in Business Innovation at the University of St. Gallen. Jessica is currently a board member of the Private Equity & Venture Capital Club of the University of St. Gallen and is particularly interested in making the financial industry more attractive to women.

Nico Meier is studying master’s in Accounting an Finance at the University of St. Gallen. Nico has been working at BLR&Partners where he is responsible for private equity investments. Additionally, he has experience providing M&A, ECM and DCM services.

Kristjan Jespersen is an Associate Professor at the Copenhagen Business School. He studies on the growing development and management of Ecosystem Services in developing countries. Within the field, Kristjan focuses his attention on the institutional legitimacy of such initiatives and the overall compensation tools used to ensure compliance.

Source: photo by Justus Menke on Unsplash

Under the radar: How companies can redefine what we consider socially responsible

By Verena Girschik

◦ 2 min read ◦

Notwithstanding promises of win-wins and synergies, we have good reasons to question whether companies address social problems in society’s best interests. As many critics have pointed out, companies tend to promote solutions that foster their commercial interests – often without considering their broader social impact.

Do our suspicions stop them? Of course not. Companies are usually well aware of any concerns and continuously evaluate the risk of prompting a controversy around their social activities. When they don’t have the social license to operate, they simply cultivate relations with organizations that do and get them to act on their behalf. Using such relational strategies, companies’ efforts remain hidden from public scrutiny insofar as they operate under the radar. Smart!

It’s not quite that simple, however. Legitimate organizations such as NGOs are just as aware of those widespread suspicions, and they are therefore often reluctant to work with companies. Indeed, if an organization’s relations with companies are perceived to be inappropriate, the organization risks exacerbating concerns around corporate influence and may thereby jeopardize its legitimacy too. The widespread suspicions of companies’ intentions thus make it more difficult for companies to participate in social change. Let’s call this a legitimacy barrier. 

Overcoming the legitimacy barrier through relational work

How do companies overcome the legitimacy barrier and become legitimate actors in social change? In a recent publication (Girschik, 2020), I theorize how companies may engage in relational work to cultivate and shape their relations with legitimate organizations in such ways that redefine their involvement as socially responsible and thus legitimate. The paper details that companies can take four interdependent steps:

  1. Cultivating communal relations: As a first step, companies can form or strengthen personal relations with people who work for legitimate organizations and who are likely to be interested in addressing the social problem in question. On a personal rather than organizational level, it is easier to align and create a shared understanding of potential courses of action.
    
  2. Extending organizational support: Once a shared understanding is evolving, the company can start diligently targeting resources that enable the other organization to boost its activities and address the social problem. Such support has to happen on the organizational level to make sure that it is not considered for individual gain.
    
  3. Articulating a partnership: Because the second step produces salient practical outcomes and illustrates the benefits of corporate involvement, it opens a window of opportunity to formalize collaboration through a partnership agreement. As part of this agreement, the company can participate in defining not only further courses of action but also the company’s role.
    
  4. Differentiating as a socially responsible company: At this point, the company’s competitors have likely become interested and may try to imitate the company’s involvement by forming partnerships with the same or similar legitimate organizations. That’s a good thing for the first-moving company because it promotes the legitimacy of such partnerships. And benefiting from its strong relational embedding, the company is likely to outperform competitors through superior compliance with expectations. Being perceived as less sincere, competitors’ efforts are thus less strategically valuable and the first-moving company stands out as most socially responsible.

This process is time- and resource-consuming, but my study shows that it may pay off: it may enable companies to legitimate their involvement in social change while securing a competitive edge.

For better or worse?

These four steps explicate subtle yet consequential efforts through which companies may shape social change. The good news is that it is not easy and takes genuine long-term commitment. The bad news is that companies’ commercial interests may inform and mold trajectories of social change while their actual influence is hidden under a CSR veil. We need to keep deconstructing the relational constellations through which companies establish and exert their influence. 

Reference

Girschik, V. (2020). Managing Legitimacy in Business‐Driven Social Change: The Role of Relational Work. Journal of Management Studies, 57(4), 775-804.

About the authors

Verena Girschik is Assistant Professor of CSR, Communication, and Organization at Copenhagen Business School (Denmark). She adopts a communicative institutionalist perspective to understand how companies negotiate their roles and responsibilities, how they perform them, and with what consequences. Empirically, she is interested in activism in and around multinational companies and in business–humanitarian collaboration. Her research has been published in the Journal of Management Studies, Human Relations, Business & Society, and Critical Perspectives on International Business. She’s on Twitter: @verenacph

Source: photo by Kelly Sikkema on Unsplash

Who really cares about the SDGs when it comes to nobody’s responsibility?

By Suhyon Oh

◦ 2 min read ◦

The Sustainable Development Goals (SDGs) are the common goals of global development as we all agreed. Since its endorsement in 2015, it has become the norm. Multilateral corporations, aid agencies, development finance institutions and international organizations all refer to one or two Sustainable Development Goals (as their priorities) to legitimize environmental and social impact of their business activities. (I must confess here that I was also one of them). However, what are the actual changes in practices? Does it merely work as one other additional reference to our work? Otherwise, does it provoke transformational changes in our business strategies and practices for sustainability? Ironically, the Sustainable Development Goals are at once too sophisticated and too vague to do so.

The complexity of the goal structure should not be an excuse.  

The development process of SDGs has been grounded based on lessons learnt from the Millennium Development Goals. Because the MDGs excessively focus on the social aspect of development, the SDGs embrace economic, social, and environmental aspects. This led the number of goals to increase from 8 to 17. In relation to the goals, 169 target goals and 231 indicators have been developed to track the progress of 17 goals (In comparison, the MDGs only have 21 target goals and 60 indicators). These vast numbers intend to strengthen progress monitoring and enhance result management; however, such complexity seems problematic to fulfil the initial purpose. Some indicator selection processes are still under the technical review process after five years of SDGs have once passed and almost half of the indicators (106 out of 231) contain technical difficulties producing data on a regular basis to track the progress. I know that measuring the fulfillment of the whole massive SDGs is complex and may not be an easy task. However, when it comes to wrestling with such a giant, the sophisticated skill set (here, seeking clear target goals and indicators) would be a winning strategy rather than hurdles. Thus, how should we deal with the giant?  

 We have to consider which specific target goals and indicators are aligned with my actions if you have a will to achieve the SDGs. Simply stating one of the goals does not track your achievement. Each goal cannot be even drawn in parallel rather they are all interlinked.

Universality matters, but not everyone is in the same boat. 

We know why the SDGs have a principle of “No one left behind” across all the goals. This principle is again a result of lessons from the MDGs, which were criticized for the fact that they did not consider inequality and vulnerable groups in a development process. So that, this core principle is embedded into seventeen goals with the terms “inclusive”, “for everyone”, “for all” regardless of the developmental stage of their nations. Then, how can we make sure this would go far beyond the rhetoric?

We need extreme caution here. Do we have enough knowledge on those who are left behind? To move forward beyond the rhetoric, we need to unpack the word ‘everyone’. Even though ‘universality’ is an essential principle, we have to find out ‘who is left behind’ in every different context to make them not left behind, rather than concealing those excluded people under the name of “for everyone”.

Let’s see microfinance. It was expected as a universal means to reduce poverty and inequality since it provides a way of financial inclusion to those previously excluded to access credit. However, many research findings demonstrate that a particular type of “financial inclusion” which is embedded into microfinance cannot solve the marginalized groups’ economic challenges by itself. Without complementary social support, it was not enough to empower the poor, and even sometimes it resulted in an exacerbating situation for the people. I think this tells us the importance of deeper understanding of the poor, thus the need for a carefully targeted approach for impact. 

In brief, working for “everyone” requires additional attention and effort. Whose reality should count first? How could we guide us to hold clear accountability to turn the “No one behind” catchphrase into concrete actions? I believe one of the roles of research on the SGDs should be founded here.

SDGs as a norm: it should be embedded into everyone’s everyday life. 

Unlike the age of the MDGs, the SDGs involve a variety of actors such as private sectors and civil societies, who were not officially a part of the MDG process. Various stakeholders can create synergy through cooperation, but the responsibility to fulfil the SDGs become vague. According to Jurkovich (2019), three essential elements are needed to become a norm: “a moral sense of “oughtness”; a defined actor “of a given identity”; a specific behaviour or action expected of that given actor”. The SDGs as a global norm neither identify relevant actors for each specific goal and indicator nor have a compliance mechanism.

Sadly, the SDGs do not assign the responsibilities to anybody and the technical difficulty to monitor them also implies oughtness can be weakened. Frankly speaking, we officially have no obligation to contribute to the SDGs. 

Despite its non-obligatory identity, I strongly believe that most of us have a willingness to dedicate to the SDGs. Although we all understand its complexity of monitoring, ambiguity of target people and non-compliance mechanisms. I urge you as an individual, a scholar or a member of the whole global development community to carefully consider what goals/target goals/indicators and for whom I can contribute with a strong responsibility. Otherwise, the SDGs risk losing its political power and may be on track to decay its status as the norm before its completion in 2030.

About the Author

Suhyon Oh is a PhD fellow at the Department of Management, Society and Communication, Copenhagen Business School, and has over ten years of professional experience working with the donor agency, international organizations, development consultancy, NGOs as well as private sectors. As an international development expert, she has worked with the projects on development finance, financial inclusion and global value chain development, etc. Her current research interest is development finance institutions, impact investing funds in developing countries, hybrid organization strategy and strategy as practice.  

How organizations avoid to hire highly-skilled migrants

By Annette Risberg and Laurence Romani

◦ 2 min read ◦

Labor integration of migrants is a topic frequently on the public and political agendas, as it is increasingly seen as the first step to successful societal integration. Often the light is turned on the migrants and what they need to change and improve to get a job. They are expected to make themselves employable by learning the local language, by adapting to local ways of applying for jobs, and by adding local skills to their existing competencies. So, it seems, the moment migrants show some form of adaptation, they should do fine on the job market. But do they?

Why do organizations under-employ highly-skilled migrants? 

Well, maybe there is more to it. Highly-skilled migrants are often underemployed. This means they get jobs below their qualification level. We have all heard of the medical doctor driving a taxi. But who asks ‘why does a taxi company hire a medical doctor as a driver’? In a recent study, we decided to turn the light on the employers, the hiring organizations, instead of the migrants. We searched for an answer to the question of why organizations under-employ highly-skilled migrants.

We followed a mentor program aiming to integrate highly-skilled migrants in the labor market through mentorship and internship. In this program, support was given to migrants to learn the rules of the Swedish employment game, how to write a strong CV, cover letters, the importance of networks, for example. In our interviews, we talked to both mentors and mentees (migrants). They told us about arguments used in organizations to explain (or shall we say justify?) the under-employment of highly-skilled migrants. 

Alleged risk, but for whom?

They said that migrants are often described as lacking local job-seeking skills, how to write a CV, how to present oneself in the application letter, how to get in contact with a potential employer. At times, they may lack local language skills too. Yet, these skills were precisely what they acquired in the program (and in internships) and many of the migrants we interviewed possessed those skills, yet, remained unemployed. More interestingly, we got to hear that the highly-skilled migrants were also talked about in terms of bringing with them the unknown and the unfamiliar: unknown diplomas, unfamiliar job references, unfamiliar working cultures, and habits, for example. And, interestingly, in the interviews, this unknown was associated with a risk… but a risk of what? And, a risk for whom?

Keeping migrants in a lower symbolic position to maintain the power of ‘normality’.

Using the relational theory of risk, a theory where risk is seen as socially constructed, we realized two things. First, if people talked about risk, it was because they felt that something that they value was being threatened.  We found that they valued their usual (habitual) ways of doing things, the organizational normality, more than the new skills and experiences the skilled migrants could bring to the organization.

Hence, highly-skilled migrants were perceived to be a risk to the valued organizational normality and kept away from employment, to avoid disruption of this normality.

Second, if employed, they were hired at a level that did not allow them to fully contribute to the organization, at a level that indicated: your skills are not valued here, they are not to be considered, they are not to transform our usual way of doing things. 

These findings point to an organizational ground for the underemployment of migrants, independent from migrants’ skills and adaptation efforts. In simple terms, organizations may have an interest in under-employing migrants: they assure that their ‘normal’ way of working is not changed, that they are not challenged in their comfortable, everyday routines. The organization’s interest in under-employing migrants goes beyond having a (cheap) skilled workforce without recognizing its value, it is also to clearly indicate that ‘the way we do things around here is valued and we don’t want to question it’.

Who should be seen as a risk? The migrants or the organizations?

In a nutshell, we got to hear that migrants are presented by some as being a risk. But, frankly, a risk for whom? For those comfortably installed in their routines? How about we turn things around and consider that those organizations, not the migrants, should be seen as a risk.

Indeed, by stopping the integration of highly-skilled migrants, are those organizations not a risk to a sustainable society and the (labor) integration of the migrants we welcomed?

The good news is that often, this comfort of the ‘normality’ is not so difficult to change. Organizations’ routines are constantly in the making and it is actually beneficial to challenge and change them from time to time to continuously adapt to the organization’s changing environment.  So, the next time you hear that it is ‘normal’ to expect a local degree for this position, ask yourself: who really benefit from this ‘normal’? And, who should be seen as a threat here?

Further reading

Risberg & Romani (forthcoming) “Underemploying highly skilled migrants: An organizational logic protecting corporate ‘normality”. Human Relations. 

About the Authors

Annette Risberg is a Professor of Diversity Management at Copenhagen Business School and Professor of Organization and Management at the Inland Norway University of Applied Sciences. Her research focus is on practices of diversity management in general and the inclusion of immigrants in organizations. Her latest co-edited book is The Routledge Companion to Organizational Diversity Research Methods and Diversity in Organizations.

Laurence Romani is an Associate Professor at the Stockholm School of Economics. Her work focuses on representation and interaction with the cultural Other in respectful and enriching ways. She currently investigates the conditions of integration of the perceived cultural Others (e.g. ethnic minorities, migrants) in the Swedish labor market. She critically studies race, gender and class hierarchies in organizations’ work with cultural diversity.

Is Pollution the Only Road to Business Prosperity?

Sustainable Visioning as a driver of Corporate Transformation

By Heather Louise Madsen

◦ 4 min read ◦

CO2 reduction is a hot topic for almost every company today. Here the focus is not just on the CO2 generated by the company itself, but also on the carbon emitted along its value chain. The problem is that changing processes, or even products and services, to make them more environmentally friendly can be a daunting and costly task. This can leave CEOs and other top managers wondering what the real cost and impact of CO2 reduction is, where to start, and whether it is even possible to create a prosperous business without generating pollution.

In answer to many of these tough questions, an increasing number of companies are succeeding in reducing carbon and completely transforming their businesses into sustainable and profitable powerhouses, using a combination of strategic vision and sustainability orientation.

A new CEO for a Company Topping the Sustainability Ranking Charts

January 1st, 2021 was Mads Nipper’s first day as CEO of the Sustainable Energy Giant Ørsted. And before the end of his first month in this new position, Ørsted ranked the most sustainable energy company for the third year in a row, and the second most sustainable company in the world after Schneider Electric. This raises the question, what is Nipper’s position on sustainability,  and are these views important for his role as CEO of Ørsted?  

In 2016, as the then CEO of Grundfos, Mads Nipper gave a presentation for the Global Compact Leaders Summit in New York where he stated: “I represent an SDG 6 and 13 company, who also happens to be the biggest water pump company in the world.” The UN Sustainable Development Goals (SDGs), representing a global platform and common language for addressing 17 core sustainability issues and their impact, also figure prominently in Ørsted’s corporate language. From Annual Reports to investor letters, Ørsted identifies SDG 7 (energy) and SDG 13 (climate action) as their primary impact areas. This indicates that there may be some very fundamental alignment between Nipper’s visionary statement and the mindset of his predecessors at Ørsted.

What led Ørsted to up-end their core business and undertake a sustainable transformation?

In 2001, Ørsted (then DONG Energy) hired CEO Anders Eldrup, just as Denmark was going through a liberalization of the electricity and gas sectors, which was putting extreme financial pressure on the company. Eldrup was the former Danish Secretary of State, and as such had extensive experience with both financial and political mechanisms. Seeing an opportunity to take advantage of an emerging political demand for climate action and policies to accelerate the development of offshore wind, Eldrup began increasingly to focus innovation resources on offshore wind and renewable energy, while the primary business of the company remained oil and gas. As renewable energy subsidy schemes increased in Denmark and the EU in the years that followed, Eldrup formulated a new company strategy that was released in 2009 called 85/15: “to transform our company from a situation of 15% renewable energy and 85% of fossil-fuel based energy to the opposite”. Jakob Askou Bøss, Head of Strategy and Communication at Ørsted, identified the strategic analysis of CEO Anders Eldrup as “The driving force behind formulating the new vision of the company,“ referring to the 85/15 objectives.

Despite the sacrifices that would need to be made as the core competencies of the company would have to be completely re-designed and transformed to focus on not-yet price competitive technology, the decision had been made. And this strategy was then further anchored to sustainability with Ørsted’s vision: “creating a world that runs entirely on green energy”. This vision made explicit the desire to reach outside of the organization with their “green” aspirations, connecting not only to ideals of wealth and prosperity, but also to planetary concerns.

These ‘green aspirations’ were then followed up by Eldrup’s successor Henrik Poulsen, who became Ørsted’s CEO in 2012. As stated by Poulsen:

“In the world of energy, the fundamental challenge we face is to transform our energy systems so that more and more of the energy we generate comes from renewable sources such as wind power, biomass and solar energy.”

Ørsted, Our sustainability reports, 2012, DONG Energy’s GRI Reporting 2012  

Poulsen then backed these aspirations by setting very specific targets for the company including “quadrupling our offshore wind capacity, from 1.7 GW in 2012 to 6.5 GW in 2020“. By 2017 Ørsted had completely divested all upstream oil and gas. This was also the year that newly built offshore wind became cheaper than black energy for the first time in history. By the time Ørsted reached 2020, the company was ranked number 1 of more than 7500 international, billion-dollar companies in the Corporate Knights’ 2020 index of the Global 100 Most Sustainable Corporations in the World, making Ørsted the most sustainable energy company in the Global 100 index. As demonstrated by Ørsted, strategic vision and sustainability orientation were used as drivers for innovation, transformation  and growing the company’s sustainable business and investment portfolio. But how can Ørsted’s story help other businesses? The answer lies in sustainable visioning. 

How can sustainable visioning help businesses onto a path of prosperity AND sustainability? 

Sustainable Visioning is a new term defining the management process of combining a strong strategic vision with the acknowledgement of the necessity of committing more profoundly to people, planet and prosperity concerns.

Madsen & Ulhøi, 2021

The following are guiding principals of sustainable visioning that Ørsted can be seen as applying, and which may be able to help other companies onto a similar path. First, in order for businesses to achieve sustainable visioning, they need to practice proactive, extroverted and visionary, rather than introverted approaches to sustainability. When working on sustainable innovations, it can also be wise to engage the Tripple Helix model including industry, universities and government working together. Innovation can also be usefully extended beyond products and services, to include business model innovation. This can help to navigate to a desirable sustainable future through direct planning, decisions, actions and behavior in all aspects of the business. And finally, taking a clear long-term orientation is also seen as important for sustainable visioning to be successful. 

In practice, following these key guiding principals of sustainable visioning may make it more likely to effectively link strategic visioning to long-term sustainability objectives, providing the necessary support for corporate growth and innovation needed to ensure a successful transformation.

Further Reading

Madsen, H.L., Ulhøi, J.P. 2021. Sustainable visioning: Re-framing strategic vision to enable a sustainable corporate transformation. J. Clean. Prod. 228.

About the Author

Heather Louise Madsen, Ph.D. is the PRME Strategy Manager at Copenhagen Business School, and has over ten years of professional experience working with sustainability. As a sustainability expert, she has worked with the organizational implementation of the UN SDGs in the private sector, and has extensive experience working with CSR, the UN Global Compact, carbon footprint reporting and social, environmental and economic sustainability. Heather is dedicated to topics of innovation, strategy, business transformation, organizational learning, business model innovation, renewable energy and sustainability.

A Southern-centered perspective on climate change in global value chains?

By Peter Lund-Thomsen

◦ 2 min read ◦

The garment and textile industries account for around 10% of global CO2 emissions, and their fast fashion approach consumes huge amounts of water in production and processing stages. While the fast fashion model incentivizes the overproduction/consumption of clothes, more sustainable solutions lie in the configuration of value chains towards slow fashion (durable products produced on demand) and the introduction of circular business models. Such a transformation will have consequences for the environment, workers’ conditions, and economic development.

This is particularly the case in the light of COVID-19, which led to a temporary disruption in the global garment and textiles value chains as stores closed in Europe and the United States in the spring of 2020. The cancellation and non-payment of garment orders particularly affected suppliers and workers in Bangladesh, leaving hundreds of thousands of workers without jobs and possibly facing destitution. 

This is the focus of a new research and capacity-building project on ‘Climate Change and Global Value Chains’ coordinated by the CBS that has recently been funded by the Danish Development Research Council. In this research project, we will be working with colleagues from the University of Aalborg and Roskilde University in Denmark as well as BRAC University and the University of Dhaka in Bangladesh. Private sector partners include the Danish Ethical Trading Initiative and Danish Fashion and Textile. 

I think that a key challenge in this new project is how we approach ‘climate change’ in the context of global value chains.

In the Danish debate on climate change, it is almost universally accepted that climate change should be at the top of the political and corporate sustainability agendas. However, both employers and workers in the Bangladeshi garment and textile industries may not perceive climate change mitigation as an immediate priority.

First, the purchasing practices of major brands sourcing garments from Bangladesh tend to result in downward price pressures, seasonal fluctuations in demand, and shorter lead times while, at the same time, these brands are also imposing ever greater environmental and labor standard requirements on their suppliers (not only in Bangladesh but elsewhere in the global South). Economic value is very unevenly distributed along the textile/garment value chain, with major brands reaping up to ten times higher economic value than suppliers – and even less reaching workers.

Hence, Bangladeshi suppliers often perceive the environmental and labor requirements of brands as adding to their costs without bringing additional business benefits.

In this context, suppliers may have very few, if any, incentives to address climate concerns in their value chains, while workers in the industry are trying to survive in a context of economic uncertainty.

In my view, a critical aspect of this new project is therefore that we will not only look at climate change from a Northern-centered perspective; that is, we are not only concerned with how brands and factories engage in the process of decarbonization. We will also zoom in on the importance of climate change adaptation, which I would label a more Southern-centered perspective on climate change in global value chains.

In fact, Bangladesh is one of the countries most affected by global climate change whose coastal areas and ports are prone to flooding, resulting in disruptions of the garment/textile value chain and economic losses for local manufacturers and workers.

Moreover, garment factories in greater Dhaka have extremely high lead and CO2 emissions, while many factory workers live in parts of the city that have unhygienic water supplies and must cope with living conditions that affect their health. Hence, integrating climate change and global value chain analysis from a Southern-centered perspective, I would argue, involves looking at the ‘business case’ for climate change adaptation – in other words, we must understand how can climate change adaptation can help in securing the future viability, competitiveness, and jobs in the garment industry and textile industries of Bangladesh. 

About the Author

Peter Lund-Thomsen is Professor at the Department of Management, Society and Communication at Copenhagen Business School. His research focuses on sustainable value chains, industrial clusters, and corporate social responsibility with a regional focus on South Asia.

Do we need to sacrifice to mitigate climate change?

By Laura Krumm

◦ 3 min read ◦

It is not news anymore that a change of consumer behavior is needed in order to have a chance at mitigating climate change. Almost every consumer action today can be quantified in terms of environmental impact. We know that we should opt for the tofu sticks instead of the steak at our neighbor’s barbeque, and we know that we should avoid the all-inclusive vacation to the Caribbean and take a cozy camping trip at Denmark’s beaches instead. What we don’t know is what those behavior changes mean for consumers. What are the consequences for our individual quality of life and well-being?

Self-sacrificing for the planet

The expectation does not seem to be very satisfying. Most of us have heard the word “sacrifice” in the context of environmentally friendly behavior before. The message we receive from climate activists, journalists and researchers is very clear:

We need to change our behavior today to avoid the catastrophic consequences of climate change tomorrow. We need to change our behavior for our children, the animals, other people in other countries, or our own future lives – even if we don’t want to.

We are expected to change our behavior for the greater good, while our own desires have to wait in line [1, 2].

This sacrifice narrative cannot only be found in climate change communication but also in consumers’ minds: When investigating what was hindering consumers to act environmentally friendly when they generally value the environment, the expectation of sacrifice and lowered quality of life was found to be one important factor [3]. Consumers seem to equate environmentally friendly behavior with a loss in quality of life and comfort. This anticipation, among others, prevents them from changing their behaviors and joining in the efforts of mitigating climate change.

Why is this important?

While altruistic motivation – driving us to self-sacrifice for the greater good – is positively related to environmental behavior [4], it can only get us so far. Another main driver of our actions is egoistic motivation. And as it seems, behaving more environmentally friendly is not perceived as a particularly egoistic action. While there sure are people with very strong altruistic motivation who enjoy behaving in a morally right way, many people are egoistic some or most of the time.

If the perspective of an environmentally friendly life is a bleak one, environmental engagement will be limited.

This is not only relevant for individual consumer behavior and environmental engagement, but also for policy and activism. When an environmentally friendly life seems bleak and uncomfortable to many people, it will be a difficult task to get them on board. Why would I support or vote for somebody who wants my life to become worse right now as a tradeoff for a potentially less catastrophic future?

Aside from elections, citizens who equate environmentally friendly behavior with sacrifice and lower well-being may also have lower acceptance of necessary policy interventions aimed at mitigating climate change. Consequently, the necessary change towards more environmentally friendly consumption will be hard to realize without considering its effects on well-being.

Does it have to be sacrifice?

Is it even true that environmentally friendly consumption can be equated with sacrifice, discomfort and a bleak existence?

Contrary to what the public opinion seems to believe, the relationship between well-being and environmentally friendly (or unfriendly) behavior is empirically not yet clear.

Some correlational studies even suggest the opposite: a positive relationship between environmentally friendly behavior and well-being [e.g., 5, 6]. These studies find that people who behave environmentally friendly are more satisfied with their lives. We cannot infer any causality of course – but these findings at least challenge the sacrifice assumption. This means that there may be a discrepancy between consumers’ expectations and the reality of behavior change. The sacrifice assumption might therefore not only be unhelpful in engaging consumers to behave differently, it may even be completely untrue.

What does that mean for us environmental researchers? We need to explore why consumers expect negative consequences of environmental behavior change and how to change that. We need to understand what these negative expectations are exactly. We need to take consumer well-being seriously and keep it in mind when designing behavior change policies and initiatives. And we need to rethink how we communicate about environmental behavior change and climate change mitigation.

References

[1] Kaplan, S., 2000 – Human Nature and Environmentally Responsible Behavior, in: Journal of Social Issues, 56 (3), 491-508.

[2] Prinzing, M., 2020 – Going green is good for you: Why we need to change the way we think about pro-environmental behaviour, in: Ethics, Policy & Environment, 1-18.

[3] Lorenzoni I., Nicholson-Cole, S. and Whitmarsh, L., 2007 – Barriers perceived to engaging with climate change among the UK public and their policy implications, in: Global Environmental Change, 17, 445-459.

[4] De Groot, J.I.M. and Steg, L., 2008 – Value orientations to explain beliefs related to environmental significant behavior, in: Environment and Behavior, 40 (3), 330-354.

[5] Binder, M. and Blankenberg, A., 2017 – Green lifestyles and subjective well-being: More about self-image than actual behavior?, in: Journal of Economic Behavior & Organization, 137, 304-323.

[6] Brown, K. W. and Kasser, T., 2005 – Are psychological and ecological well-being compatible? The role of values, mindfulness, and lifestyle, in: Social Indicators Research, 74, 349-368.

About the Author

Laura Krumm is a PhD fellow at the Department of Management, Society and Communication and a member of the Consumer & Behavioural Insights Group. In her PhD project she explores the intersection of environmental consumer behavior and well-being.

Photo by Markus Spiske on Unsplash

Innovating Under Pressure – Grassroots’ social and distributed manufacturing during the pandemic

By Isabel Fróes

As Bowie almost made a prediction when he sang in his lyrics from 1981: ‘It’s the terror of knowing what this world is about/Watching some good friends screaming “Let me out!”/’, 2020 proved to be a year of challenges, which however took us to higher grounds of learning and collaboration in many unexpected ways.  

The sudden changes and lockdowns across the world led by Covid-19 sparked many initiatives and innovation in various fields. As presented in a previous blog post, it created opportunities for urban spaces to be rethought, experimenting with expanding and further developing various mobility formats.

Beyond urban spaces, the pandemic also became a fuel to push initiatives in other fronts, such as social and local manufacturing. 

Makerspaces and local production initiatives were well described in a recent blog post by my colleague Efthymios Altsitsiadis. During the pandemic, makerspaces became more than a niche, through shared content and distributed leadership, these spaces became relevant production resources. Makers collaborated and engaged in locally producing personal protective equipment (PPE), helping cities and countries better cope with the shortages and international supply chain issues during the first lockdown.  

CBS has followed this process closely as it is currently a partner in the EU-funded iPRODUCE project. The project started in January 2020 focusing on developing a novel social manufacturing platform that embraces manufacturing companies in the consumer goods sector. In short, the project is committed to bringing closer manufacturers, makers and consumer communities (MMCs) at the local level; to engage them into joint co-creation challenges for the manufacturing of new consumer products and the introduction of novel engineering and production (eco)systems; to fuse practices, methods and tools that both makers and manufacturing companies (SMEs specifically) are employing.

The project, as an innovation action (IA), has formed clusters in six locations, Denmark, France, Germany, Greece, Italy and Spain composed of Fablabs, makerspaces and research institutions. These clusters are defined as Collaborative Manufacturing Demonstration Facilities (cMDFs). In Denmark, CBS is the research institution working closely together with betaFACTORY forming the DK-cMDF.

In the context of this project, social manufacturing can be described as a primary ground to democratise innovation.

The ‘Do it yourself’ (DIY) movement, assisted by makerspaces and fablabs, offers opportunities for real exchange towards solutions to inform the development of many products through an open platform, to not only support, but also to expand these processes and broaden their reach across society. 

During the onset of the pandemic, when the project was only in its third month, while project activities required adjustments and re-planning, the fablabs and makerspaces in the distinct locations became important resources for local manufacturing facilities, closing a gap of problems related to international supply chain production and distribution regarding protective medical gear.

The open source community’s umbrella became a key local asset in bridging various groups and bringing makers together towards one goal – manufacturing products that would help save lives.

Spain, which was hit hard by the pandemic early on, spearheaded this movement in Europe. Already in March 2020, DIY groups organised themselves online (primarily WhatsApp and Telegram), sharing questions and designs through these social media platforms. Doctors and other types of stakeholders also joined some of these groups, providing expert information. They shared requests, talked together and developed designs and models, which were then 3D printed widely across in various makerspaces, sparking a local production and distribution supply chain. The distribution, which was initially done by volunteers, was carried out by taxi drivers and local police in an extraordinary mode of collaboration during the most extreme lockdown phases. By June 2020, over one million face shields had been produced and distributed across Spain [1].  

The Spanish face shield design, under the creative commons licence, was picked up by makers everywhere, including in Denmark, where the Facebook group ‘DK Makers mod Corona’ (DK Makers against Corona) was quick to adapt the design to specific Danish regulations and started locally producing the face shields during the first Danish lockdown. Over 63000 face shields were produced and distributed across the country by July 2020 and the Facebook group grew from 50 to over 2500 members during the same period.

In both cases, what stands out is the fact that the expertise, manufacturing capability and human resources are without doubt available everywhere and when a common and purposeful goal is set, fast and impactful results can be achieved.

These civic responses also bring forward questions on how society could make better use of these valuable resources for other distinct local challenges, and how we can positively disrupt mass global manufacturing towards distributed local manufacturing. As the pandemic initiatives have shown, by reorganising and setting common goals, makers and industry can bridge gaps, creating wider societal benefit that challenge the status quo and push new manufacturing opportunities that can define ‘new normals’ also for local production – taking all of it to higher and more sustainable levels in the 21st century.

iPRODUCE – “A Social Manufacturing Framework for Streamlined Multi- stakeholder Open Innovation Missions in Consumer Goods Sectors” (2020-2022) has received funding from the European Union’s Horizon 2020 research and innovation programme under Grant Agreement no. 870037. This publication reflects only the author’s view and the Commission is not responsible for any use that may be made of the information it contains.

References

[1] MAKERY, 2020. Spanish makers’ ongoing fight against COVID-19. Published by Cesar Garcia Saez.

About the Author

Isabel Fróes is a postdoc at MSC Department at Copenhagen Business School working in three EU projects (Cities-4-People, iPRODUCE and BECOOP). Isabel also has wide industry experience and has worked both as a user researcher and service design consultant for various companies in Denmark and internationally. For more detail please see her Linkedin profile.

Photo source: NC State University

Counting Trees in the Hopes of Managing Forests – Technological solutions to palm oil deforestation?

By Isaac Caiger-Smith, Izabela Delabre and Kristjan Jespersen

In recent years, companies dealing in global commodities – such as palm oil, soy and timber – have faced increasing criticism for failing to meet zero deforestation targets in their supply chains. In response to these concerns, the use of innovative technological solutions, such as satellite monitoring systems to monitor deforestation in supply chains, are becoming increasingly commonplace.

Companies such as Global Forest Watch, Satelligence and MapHubs provide such platforms, though many large companies also choose to create their own monitoring systems in-house. It is in the palm oil sector that adoption of satellite monitoring has (so far) been most widespread. The palm oil sector is commonly characterised as being ‘hourglass’ in shape, with hundreds of thousands of growers/producers, mostly in Indonesia and Malaysia, being connected to hundreds of thousands of end users all around the world by a handful of powerful traders and refiners. Previously, single companies aiming to monitor their supply chains for deforestation risk would thus be faced with the impossible task of keeping track of (potentially) thousands of suppliers simultaneously.

In principle, satellite technology platforms signify a ground-breaking shift in possibilities for those concerned with monitoring deforestation risk.

By making it possible to map out suppliers’ concessions and monitor in ‘near real-time’ for deforestation events, consumer goods manufacturers and palm oil traders are able to cheaply and accurately ensure suppliers’ compliance with their commitments to zero deforestation, punishing non-compliant suppliers, encouraging and incentivising good environmental practice (Global Forest Watch, 2020). The clear promise such technology brings has led to their rapid uptake by the majority of the world’s largest palm oil traders and refiners, as well as many influential consumer goods manufacturers and non-governmental organisations. The hope of companies and non-governmental organisations is that such technological initiatives will play an important role in supporting zero deforestation efforts. As such, many of these actors are investing significant capital to increase their monitoring capabilities, and are highly vocal about doing so, speaking of the positive environmental impacts they claim will flow from their use. 

Through a series of in-depth interviews, it quickly became clear that despite the far-reaching functions these actors claim satellite monitoring can serve, its impact on the palm oil sector thus far has been far more limited in scope (both in terms of impact on supply chain relations and environmental outcomes) than the PR teams of the world’s palm oil giants seem to suggest.

Despite some positive developments in the realm of certified palm oil, the widespread adoption of satellite monitoring schemes across the palm oil sector has thus far failed to significantly reduce the rates of tropical deforestation associated with the industry.

Lyons-White and Knight, 2018.

Although satellites provide timely data on exactly where and when deforestation is occurring, traders and refiners have thus far been largely unable to use the data to influence the behaviour of offending firms. There are numerous reasons why this is the case. 

Decontextualised data

Knowing where deforestation is occurring does not necessarily tell you who is responsible. In many instances, palm oil traders simply do not know who their third-tier suppliers are – if the alerts provided by remote sensing data cannot be combined with full knowledge of a firm’s supply chain (‘traceability to plantation’), they will often be unable to act on them. Achieving 100% traceability to plantation is a task all of the major traders are currently engaged in, yet it is a long and difficult process – as previously mentioned, the structure of the palm oil sector is complex, with numerous tiers of suppliers separating those engaging in monitoring from those being monitored.

In addition, the difficulty of the task is further exacerbated by inaccurate data on land ownership, competing claims, and unofficial occupation. Until these systemic issues are addressed, the situation regarding monitoring will remain much as it is today – satellite monitoring systems will continue to provide accurate alerts, but in the vast majority of cases (approximately 90%, according to interviewee from palm oil trader) traders will be unable to attribute it with certainty to actors from their supply chain, and thus will not be able to meaningfully respond. 

Leverage issues

In instances where technology users are able attribute a deforestation alert to an actor from within their supply chain, firms often lack the leverage to change suppliers’ behaviour and ensure compliance with their sustainability standards. Buyers have two options: negotiate with producers or blacklist them.

Given that buyers are unwilling to pay a premium for deforestation-free products (Delabre et al, 2020), providing incentives for non-compliant suppliers to stop harmful behaviours is challenging – expecting growers to bear all the costs associated with non-expansion without any reward is not a sustainable system. Furthermore, the threat of being blacklisted from a company’s supply base is also unlikely to have the desired impact; suppliers will likely have no trouble finding other buyers, in markets where sustainability credentials are generally seen as less of a priority (Schleifer & Sun, 2018).

In this context, it is clear that thus far, satellite monitoring has not been capable of producing the far-reaching effects, which may have been desired.

Despite this, satellite monitoring has certainly contributed to several interesting developments in the palm oil sector. For example, interviewees emphasised the positive impacts of environmental non-governmental organisations armed with satellite monitoring technologies, acting as unofficial but powerful ‘watchdogs’, ‘naming and shaming’ consumer brands and traders associated with deforestation events.

It seems the ever-present risk of exposure (and subsequent brand damage) posed by non-governmental organisations’ use of satellite monitoring is a significant driver of new norms and practices within the industry.

These norms emphasise that it is necessary for powerful actors, such as traders and consumer goods manufacturers to be proactive in effectively addressing deforestation, both within and outside their supply chains. Interviewees also emphasised increasing levels of dialogue/cooperation across actor types, through for example, the creation of focus groups made up of producers, traders, local governments and community leaders, for the purpose of discussing the data provided by satellite monitoring, and working together to create solutions. In light of the ever-increasing levels of transparency that satellite monitoring brings, such institutions seem an inevitable and positive consequence of implementation.

However, given the severity of the contextual constraints hindering the industry’s sustainability, it is unlikely that such noble intentions (or even significant capital investments) will be capable of truly addressing the problem. 

Satellite monitoring technology has dramatically expanded the realms of possibility for forest governance, yet its implementation in the palm oil sector remains hindered by the structures, institutions and political and legal realities of palm oil production, and producing countries more broadly, dramatically reducing its ability to create positive change. Whilst they are clearly useful tools for environmentally conscious actors aiming to reduce their deforestation risks, they are only one small piece in a very complex puzzle. The problem of tropical deforestation caused by palm oil expansion is at once an economic, political, social and historical problem. As such, ‘technological fixes’ or the actions of individual firms (or even groups of firms) are themselves unlikely to lead to significant environmental improvements. In order to address such a vast problem, the underlying context must shift. Nothing less than large-scale international public and private sector cooperation is required. 

Bibliography

Delabre, I., Alexander, A. & Rodrigues, C. (2020) Strategies for tropical forest protection and sustainable supply chains: challenges and opportunities for alignment with the UN sustainable development goals. Sustain Sci 15, pages 1637–1651

Global Forest Watch (2020) Global Forest Watch Pro: Securely Manage Deforestation Risk in Commodity Supply Chains.

Lyons-White, J., Knight, A. (2018) Palm oil supply chain complexity impedes implementation of corporate no-deforestation commitments, Global Environmental Change 50, pages 303–313 

Schleifer, P., Sun, Y. (2018) Emerging markets and private governance: the political economy of sustainable palm oil in China and India, Review of International Political Economy Volume 25 Issue 2, pages 190-214

About the Authors

Isaac Caiger-Smith is a Junior Research Associate and undergraduate at the University of Sussex, studying philosophy politics and economics. His current research project focuses on the use of satellite monitoring technologies for addressing deforestation risks. 

Izabela Delabre is a Research Fellow at the University of Sussex, examining sustainable forest governance, sustainable production and consumption of food, and sustainability transformations. Izabela worked for the Business and Biodiversity Conservation Programme at the Zoological Society of London (ZSL) managing ZSL’s global oil palm work. Her PhD (Human Geography) examined the political ecology of participatory impact assessment practices in the context of the Roundtable on Sustainable Palm Oil (RSPO) in Indonesia and Malaysia.

Kristjan Jespersen is an Associate Professor at the Copenhagen Business School. He studies the growing development and management of Ecosystem Services in developing countries. Within the field, Kristjan focuses his attention on the institutional legitimacy of such initiatives and the overall compensation tools used to ensure compliance.

Photo by Carles Rabada on Unsplash

Marching toward the end of enlightenment?

How management and organization scholarship can help explain new forms of anti-enlightenment organizing

By Dennis Schoeneborn

In the scholarly field of management and organization studies, which is traditionally primarily concerned with business firms and their performance, we can lately observe an increasing attention toward addressing some of the most pressing societal challenges of our times, such as climate change, pandemics, inequalities, etc. (see George et al., 2016). At the same time, one of the most striking societal challenges has found comparably little attention by management and organizational scholarship up until today: the rise of anti-enlightenment movements and the potentially corroding effects they have for democratic societies.

The rioters’ march on Capitol Hill on Jan. 6, 2021 has showcased in painstaking ways how democracies can be endangered through social movements that center around anti-enlightenment and “post-truth” sentiments, incl. conspiracy theories, “alternative facts”, or other negations of scientific reason (for an overview, see Farkas & Schou, 2020). In the same context, the question arises how the scholarly field of management and organization studies can help address and explain the emergence of such anti-enlightenment movements and how they organize themselves.

To study the phenomenon of anti-enlightenment movements (i.e. coordinated agitation against scientific reason and facts, democratic values, or the rule of law), I suggest three research areas in organizational scholarship are of particular relevance and that each (in one way or another) cross-connect to the neighboring field of media and communication studies: 

(1) Explaining organizational emergence and dissolution

First, management and organization scholarship can explore questions of organizational emergence and design. This may involve questions like: To what extent can new forms of anti-enlightenment organizing (e.g., conspiracy theorists like QAnon or science denialists like the anti-vaxx movement) be explained with existing organizational theories – or to what extent are novel theoretical vocabularies needed to account for these phenomena? Also, how can anti-enlightenment forms of organizing be dissolved or “deconstituted” (cf. Bean & Buikema, 2015)? For example, how to counter and delegitimize anti-enlightenment ideologies in the public debate, if they are based on entirely different language games (Knight & Tsoukas, 2019), where the same signifier may have completely different meanings (e.g., truth is what is factually right vs. truth is when it serves my own interests)?

(2) Studying transformations of how the public discourse is organized

Second, management and organization scholarship can explore transformations of how the public discourse is organized. For instance, how did the media landscape change, especially through the rise of digital media, and how do these changes affect the possibilities of deliberative dialog and public will formation in democratic societies (Bennett & Livingston, 2018). In a similar vein, organizational scholars have critically addressed the spread of “fake news”, incl. the erosion of “the public” into multiple fragmented “publics” that gather info by-and-large from within their own filter bubbles and echo chambers (see also Knight & Tsoukas, 2019; Foroughi et al., 2019). Furthermore, in the same context, the question arises how to “detox” an increasingly polarized public discourse (Ward, 2019)?

(3) Exploring socio-technological conditions of “organized immaturity”

Third, management and organization scholarship can explore the underlying socio-technological conditions under which anti-enlightenment movements tend to emerge. For instance, in a recent working paper, Scherer and Neesham (2020) propose the term “organized immaturity” (which alludes to the notion of immaturity or Unmündigkeit in Immanuel Kant’s theory of enlightenment). As the authors hypothesize, individuals’ delegation of decision-making to socio-technological systems (such as algorithmic filtering of content in social media) tends to lead over time to an “erosion of the individual’s capacity for public use of reason” (p. 4; version from Dec. 22, 2020). Put this way, the concept may also help explain some of the root causes of what observers of the Capitol Hill events termed the “spoilt child version of America – so ‘free’ [that] it ignored the truths, laws and decency that actually enabled that freedom” (Paton Walsh, 2020).

To conclude, while we can find some first and important steps in the direction of exploring anti-enlightenment movements, further research in this direction is urgently needed, also as a chance to demonstrate management and organization scholarship’s ability to address (and potentially help solve) large-scale societal problems. In the same context, a recent Call for Papers by the journal Business Ethics Quarterly (Scherer et al., in preparation) invites for scholarly submissions that address the socio-technological conditions of “organized immaturity” and neighboring phenomena.

References

Bean, H., & Buikema, R. J. (2015). Deconstituting al-Qa’ida: CCO theory and the decline and dissolution of hidden organizations. Management Communication Quarterly, 29(4), 512-538.

Bennett, W. L., & Livingston, S. (2018). The disinformation order: Disruptive communication and the decline of democratic institutions. European Journal of Communication, 33(2), 122-139.

Farkas, J., & Schou, J. (2019). Post-truth, fake news and democracy: Mapping the politics of falsehood. New York: Routledge.

Foroughi, H., Gabriel, Y., & Fotaki, M. (2019). Leadership in a post-truth era: A new narrative disorder? Leadership, 15(2), 135-151.

George, G., Howard-Grenville, J., Joshi, A., & Tihanyi, L. (2016). Understanding and tackling societal grand challenges through management research. Academy of Management Journal, 59(6), 1880-1895.

Knight, E., & Tsoukas, H. (2019). When Fiction Trumps Truth: What ‘post-truth’ and ‘alternative facts’ mean for management studies. Organization Studies, 40(2), 183-197.

Paton Walsh. E. (2020, Jan. 8). America was lucky to be saved by its democracy – even if some don’t realize it. CNN.com.

Scherer, A. G., & Neesham, C. (2020). New challenges to enlightenment: Why socio-technological conditions lead to organized immaturity and what to do about it. Working Paper (version from Dec,, 22, 2020).

Scherer, A. G., Neesham, C., Schoeneborn, D., & Scholz, M. (in preparation). Socio-technological conditions of organized immaturity in the 21st century. Special issue in preparation for Business Ethics Quarterly (submission deadline: 31/05/2021).

Ward, S. J. A. (2019). Ethical journalism in a populist age: The democratically engaged journalist. Lanham, MD: Rowman & Littlefield.

About the Author

Dennis Schoeneborn is Professor of Organization, Communication, and CSR at Copenhagen Business School and Visiting Professor of Organization Studies at Leuphana University of Lüneburg. In his research, he mainly focuses on organization theory, organizational communication, digital media and communication, corporate social responsibility and sustainability, as well as new forms of organizing.

Photo from Unsplash

How do the arts impact our societies in times of digitalisation?

By Kirsti Reitan Andersen and members of the Artsformation consortium 

Two decades into the new millennium it is almost impossible to imagine a future in which digital technologies do not play a key role. Today, digitalisation changes the way things are done across business and society alike. 

This includes for example the impact of new technologies on processes of democratisation, like the role of Facebook in the UK referendum in 2016. Or the increasing collection and analysis of personal data in the use of any social media. Another area in which technology is having an enormous impact is in our ways of communication and being together, for example through technologies like Zoom or Facetime.

Throughout history, the arts have always reflected major transitions as they unfold.

Therefore, it is perhaps no surprise that the social, environmental and economic consequences of the digital transformation are now also increasingly addressed by artists. For example, with the project SOMEONE (2019), Lauren McCarthy tries to address the advances in human-machine relationships represented in ‘smart houses’ and try to give back a human identity to artificial intelligent devices through active human participation.

As part of the H2020 research project Artsformation, we explore the current and potential role of the arts in the digital transformation. Exploring the role of the arts across both business and society, one part of the project has a particular focus on marginalized groups of people who today do not reap the acclaimed benefits of the digital transformation (e.g. Gangadharan and Niklas, 2019; Gebru, 2018; Neves, Franz, Munteanu and Baecker, 2018; Park and Humphry, 2019). In this context, the “socially engaged arts” (Bishop, 2012) is of particular interest.

In contrast to more traditional forms of art, socially engaged artists often work closely with their audiences in one way or other.

For example, by gaining in-depth knowledge of particular challenges in specific communities and creating awareness about such issues through the artwork or by directly engaging people in the production of art. One such example could be the engagement of people in the production of artwork using the so-called maker spaces as a place of work and thereby also introducing “audiences” to new digital technologies and skill sets. Catch, a center for art design and technology located in Elsinore, for example, has much experience facilitating such processes of learning.  

In recent years we have seen artistic examinations of the digital transformation become increasingly complex, evolving from what we might understand as a fascination or embracement of digital tools to reflections on the transformation itself. In general, we find that socially engaged artists are addressing societal issues (of the digital transformation) in three ways (Andersen et al., 2020):  

  • The artist as a commentator:  The artist as a commentator is not directly concerned with audience engagement as part of the artistic process. The work of Dr. Ahmed Elgammal and an artificial intelligence named AICAN exemplifies “the artist as a commentator”. In this case Dr. Elgammal and AICON created an exhibition of prints called Faceless Portraits Transcending Time. While there is no direct audience engagement, the work of Dr. Elgammal and AICON brings attention to current debates about technology and creative work.
  • The artist as one who gives voice to a community:  More than ever, artists have become ever more important as voices of reason and clarity, pressing for social justice and engaging the public conversation about the controversial issues shaping the world in which we live. Forensic Architecture’s attempt to raise awareness of oil and gas pollution in Vaca Muerta, Argentina, is a good illustration of this approach. Vaca Muerta has become one of the world’s largest shale oil and gas fields. It is also the home of indigenous communities, including some of the Mapuche people who live between Chile and Argentina. In collaboration with The Guardian newspaper, Forensic Architecture investigated a local Mapuche community’s claim that “the oil and gas industry has irreversibly damaged their ancestral homeland and eroded their traditional ways of life.”
  • The artist as a social entrepreneur: consults and facilitates a community problem in a much more ‘organised’ and ‘long-term’ manner than is typical of the two previous roles. This, for example, is what happened when artist Olafur Eliasson and engineer Frederik Ottesen at London’s Tate Modern launched the social enterprise Little Sun in 2012, setting out to change the world with ‘solar art’. Little Sun aims to bring clean, reliable and affordable energy to the 1.1 billion people who live without electricity while raising awareness of energy access and climate action worldwide. Eliasson demonstrates his conviction that art can change the world by continuing to promote Little Sun as an extension of his art practice, arguing that many of Little Sun’s “current and future projects stem from art, involve artistic thinking or use our products themselves to create art”.

While all three roles co-exist, intersect and share the ability to imagine new ways and generate change, each role does so in slightly different ways. We suggest that each of the three roles requires artists to organise in different ways, which may also impact the kinds of change they can facilitate. Moving forward, we are extremely eager to explore the ways in which artists as social entrepreneurs may inspire and offer new and more sustainable ways of organizing. 

Further Reading

The Social and Civic Impact of the Arts

About the Author

Kirsti Reitan Andersen is a Post Doc at the Department of Management, Society and Communication, Copenhagen Business School. In her current work, she explores the role of the arts in the transformation towards more sustainable ways of organizing.

Photo by Stan Narten and Otto Saxinger, SOMEONE.

Can we pay for success in healthcare?

By Mikkel Munksgaard

Demographic megatrends, such as ageing populations, challenges public health budgets in developed countries. Currently, health costs in OECD countries are growing at roughly double the rate as the average growth in GPD. ‘Pay for Success’ is an emergent, and highly innovative, partnership model promising both increased cost-effectiveness and patient-centric services in healthcare. Whether or not the model will constitute a critical feature of future health systems, only time will tell. 

Due to critical leaps in modern healthcare and medicine, the average life expectancy in developed countries has doubled since 1900 [1]. While this is an important success, it also challenges public health systems because chronic diseases occur much more often at old age. In fact, a Danish report states that the average health costs for an 86-year-old are 16 times higher than for a 20-year-old [2].

In addition, public health sectors are experiencing structural challenges inhibiting their capacity to deliver services effectively.

The lack of systematic assessments towards quality and outcomes of services creates disproportionality on financial priorities. Evidence indicates that up to 30% of healthcare expenses are wasted on unproven or unnecessary treatments.

World Economic Forum 2017

An example of this is the general de-prioritization of preventive health interventions over short-term illness treatment. 

Introducing ‘Pay for Success’ 

‘Pay for Success’ (PFS) has emerged as an organizational solution to the problems of asymmetry and ineffectiveness in public health.  A PFS-program is fundamentally a public commissioning model based on two distinctive features 1) an outcome-based contract and 2) the engagement of an external ‘investor’.

In an outcome-based contract service delivery is outsourced to a provider and the public commissioner pays for the realization of long-term health outcomes. Hence, the public “pays for success”. Because services, such as preventive interventions, could take several years to deliver the PFS-model involves an ‘investor’ that provides working capital for the provider – and thus, takes the majority of the financial risk. This could either be a non-profit organization, a for-profit organization, or both.  The first PFS-program was developed in 2010 and since then 200 programs have been initiated mobilizing a total capital of 420 Million Dollar [3]. Especially in the UK, the PFS-market has grown and is predicted to soon reach a total value of 1 Billion Euro (Carter 2019).

A simplification of the PFS-model inspired by Third Sector (2016) 
Challenges and future directions of ‘Pay for Success’ 

While empirical studies from the UK and US does indicate that the PFS-model performs better than other commissioning models [4], they also highlight a more complex organizational structure that takes time and resources to develop – which, consequently, creates high transaction costs ultimately challenging the model’s cost-effectiveness. Technical problems related to valuating health outcomes, and creating a payment structure around such, has proven difficult and time-consuming. Additionally, the complex governance structure of PFS-programs in the UK and US has been criticized for being too rigid and focused on short-term performance – thus, inhibiting innovation. 

The emergence of PFS-programs in Scandinavian countries poses an interesting field as emerging research indicates that these programs are fundamentally different from traditional PFS-models. The tendency to utilize more networked practices as well as the existence of comprehensive public data systems in Scandinavian welfare states could potentially solve some of the most critical challenges currently faced in PFS-development. What would seem critical for future PFS-development is to leverage these emerging insights and shine more light into the ‘black box’ of PFS-development.

References

[1] World Economic Forum 2017

[2] Kjellberg and Højgaard 2017

[3] The Brookings Institution 2021

[4] Albertson et al. 2018

About the Author

Mikkel Munksgaard Andersen is Ph.D. Fellow at CBS, MSC. Through his Ph.D.-project, Mikkel studies the development and implementation of social impact bonds and payment-by-results methods in Denmark. His work centralizes around the distinct characteristics of Scandinavian impact bonds and their role in supporting and financing public services. The research takes a point of departure in the Danish research- and innovation project PreCare which seeks to develop new services and organizational models for preventive and digitalized healthcare.  See more here.

The maker movement – the quiet, game-changing revolution near you

By Efthymios Altsitsiadis

Anyone can and should have access to the tools and knowledge necessary to build anything they might need or want. This statement struck me when I first read about the makers movement – a cultural trend that is associated with democratized manufacturing, 3D printing and maker spaces.

At the heart of the movement lies a simple premise – ordinary people manufacturing themselves what they need. Makers, alone or in communities, from any career or skill level are pulled into making something, from calligraphy to furniture to technology and lately to personal protective equipment.

Large institutions like the European Commission, the White house and the Chinese government herald the maker movement as a major driver for the new “industrial revolution”, a thriving multibillion market and a potential asset in the fight against climate change.

But as with every nascent field, there are many hurdles on our way there – this piece will touch upon what many (including me) consider the most important: understanding how and why people embrace the movement.

We already know that the increase of availability and affordability of digital fabrication tools such as 3D printers and laser cutters and the advance in certain collaborative technologies have favored the creation of a rapidly increasing number of Do-It-Yourself communities. What we know much less about is why people choose to become makers. This matters gravely, not only because makers are the lifeline of the movement – but because we need to be sure that everyone can enjoy the same access to fabrication. In a large study supported by the EU, we asked thousands of citizens around Europe their opinions regarding the maker movement [1].

We wanted to understand better what people know about the maker movement, how aware they are about fabrication and how they perceive the different facilities (e.g. makerspaces). We also investigated various attitudes and potential reasons that could be driving or hampering people’s support to the movement. More importantly, however, we asked participants about their intentions to become makers and what motivates them. 

Findings of our study

What we found confirmed many of our initial thoughts.

Most of the participants were not well aware about the maker movement (40% had no familiarity with the term), but about 1 in 5 respondents had some previous experience with making. These people come from all walks of life, and despite some small differences in demographics, every cohort is represented.

A very positive finding was that most people were very open to visiting, supporting or participating in making activities in their local area. For the majority of respondents, their participation in maker spaces would provide them with benefits and help them improve their skills. The majority also believes that makerspaces will have a positive impact on their region and will open-up new professional opportunities. We dug a bit deeper so we can get a better understanding of people’s motivations.

We found that respondents who have positive perceptions about sustainability and circular economy, who were familiar with the maker movement and who defined themselves as persons who like to repair or make things were significantly more likely to join the movement.

The results also indicate that demographics like gender and age could be playing a role in driving respondent’s perceptions and participation.

This study is useful in providing some additional evidence and answers regard